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MONTHLY REVIEW
O f Credit and Business Conditions

FEDERAL
V o lu m e

31

RESERVE

BANK

NOVEMBER

OF

NEW

YORK

1949

No. 11

MONEY MARKET IN OCTOBER
Money market conditions were easy during a large part of
the past month. Treasury transactions again were the dominat­
ing influence, as Government cash disbursements in excess of
receipts from all sources provided the market with about 800
million dollars in the four weeks ended October 26. A net
increase in Federal Reserve "float” during this period added
about 50 million dollars to member bank reserves. Transac­
tions for foreign official accounts absorbed 115 million dollars
of reserves, and deposit growth increased the required reserves
of member banks by about 180 million, but currency circula­
tion showed little net change. Member banks were thus in a
position to reduce their indebtedness and to add to their short­
term investments. As a result, Reserve Bank loans and dis­
counts declined about 180 million dollars, and Government
security holdings of the Federal Reserve System fell about 450
million dollars.
During the first two weeks of October, funds were not so
freely available in New York as in other parts of the country.
The margin of Treasury disbursements over receipts was
smaller in New York than for the country as a whole because
of relatively large withdrawals from Treasury deposit accounts
in the New York City banks. In addition, during the week
ended October 12, banks in other parts of the country with­
drew some of their funds on deposit with their New York City
correspondents in order to purchase Government securities,
thus causing some drain on the reserves of the local banks.
During the week ended October 19, however, reserve posi­
tions of the New York City banks turned noticeably easier,
chiefly as a result of a heavy inflow of funds for investment
in Treasury bills and other securities, which enabled Govern­
ment security brokers and dealers to repay almost 200 million
dollars of their borrowings from New York City banks. In
fact, in the three weeks ended October 19, dealers reduced
their indebtedness to the weekly reporting member banks in
the City by almost 455 million dollars (to 480 million) and
liquidated substantial amounts of their Government security
holdings. It was not until the third week of this period, when
the securities were paid for with funds transferred from other




parts of the country, that the City banks gained reserves from
the repayment of their loans to dealers. Excess reserves o f the
City banks rose over 200 million dollars during that week.
In the last statement week of the month (ended October 26)
member bank excess reserves, both in New York and in other
parts of the country, were reduced substantially, largely through
investment operations. On the first day of the week, October
20, the banks, particularly the New York City banks, which
used their large carry-over of excess reserves from the pre­
ceding week, made heavy purchases of the new issue of Treas­
ury bills. These purchases resulted in a substantial reduction in
the Federal Reserve System’s holdings of Treasury bills, thus
absorbing a large amount of reserve funds. The banks experi­
enced further moderate losses of funds later in the week
through an excess of Treasury receipts (including 400 million
dollars of funds withdrawn from Government deposits in com­
mercial banks) over Treasury disbursements, and through the
usual end-of-month contraction of Federal Reserve "float”.
Member banks allowed their excess reserves to fall 330 million
dollars to 810 million.
Throughout the month, the member banks lost reserves as
a result of the accumulation of funds in the deposit accounts
of foreign central banks with the Reserve Banks. The increase
in such deposits was not large, but it occurred in spite of a
small decrease in the monetary gold stock, which would nor­
mally result in a reduction of foreign deposits with the Reserve

CONTENTS

Money Market in October.................................. 121
Change in Reserve Requirements
for Member Banks............................................ 123
The Trend of Business........................................ 124
United States Foreign Trade
since the War.................................................... 126
Department Store Trade.................................... 131

12
2

MONTHLY REVIEW, NOVEMBER 1949

System. The gain in these official foreign deposits probably
reflected in part the demand for foreign currencies which fol­
lowed the devaluation of the pound sterling and of numerous
otner currencies.

Treasury Cash Expenditures and General Fund Balance *

B ILLIO N S
OF DOLL AftS

B IL L IO N S
OF DOL L ARS

M e m b e r B a n k C r e d it

The seasonal upswing in commercial, industrial, and agri­
cultural loans at the weekly reporting member banks lost
momentum during October, reflecting perhaps the cumulative
effects of the coal and steel strikes on other industries. The
average weekly increase in business loans during the first three
weeks of the past month was less than 90 million dollars, as
compared with 105 million a week in September. From the
low point on August 3, the loans of these banks to business
and agriculture rose 820 million dollars; in the corresponding
weeks of the previous year, the advance amounted to about
745 million dollars. The net increase since the end of June,
however, has been smaller this year than last— less than 500
million dollars compared with more than 1 billion dollars.
Thus far the upswing in business loans has offset only part
of the decline of the first seven months of the year. The data
for the weekly reporting member banks show that on October
19 "commercial” loans were still 1.9 billion dollars below the
total at the end of 1948. However, total loans of all types on
the same date fell only 1.7 billion short of the peak reached
at the end of 1948, reflecting an expansion of real estate loans
(4 per cent), of loans on securities other than Government
issues (2 0 per cent), and of all other loans, largely consumer
loans (7 per cent). Loans on Government securities fell
sharply during this period (by 370 million, or 34 per cent),
reflecting principally liquidation during the first three weeks
of October of bank indebtedness by Government security deal­
ers. The expansion of loans on securities other than Govern­
ment obligations reflects principally increased borrowings of
security brokers on listed stocks. The demand for such loans
has possibly been stimulated by the lowering in March of
margin requirements on corporate securities listed on national
security exchanges, to 50 per cent of market values.
Although the loan portfolio of the weekly reporting mem­
ber banks as of October 19 was almost 7 per cent below the
19 4 8 year-end level, monthly figures for all other banks show
that their total loans have been consistently above the Decem­
ber 19 48 total in most of the months of this year through
September (latest month for which figures are available).
Toward the close of the latter month, total loans of the institu­
tions not reporting weekly were about 600 million dollars
higher than at the end of 1948 while total loans of the weekly
reporting banks were 1.5 billion less. Thus, the nonreporting
banks have presumably suffered no contraction at all in their
income from loans. Judging from figures taken from call
reports, showing changes in types of loans in the first six
months of 1949, the better record of the nonreporting banks




* Expenditures are monthly tota ls; the figures for the General Fund balance
are end-of-month.
S ource: U . S. Treasury. September and O ctober 1949 estimated by Federal
Reserve Bank of New York.

may be attributed not only to the fact that the business loans
of these institutions (which comprise mainly the smaller
country banks) account for a much smaller proportion of the
total loan portfolio than in the case of the larger city banks,
but also to the circumstance that their business loans declined
less than those of the larger city banks. In addition, their real
estate and all other loans rose.
Perhaps because of the continued expansion of their loans,
the nonreporting banks added only moderately to their hold­
ings of Government securities in the first nine months of the
year. The weekly reporting member banks, on the other hand,
made heavy net purchases of Government securities in the first
nine months of the year (4.0 billion dollars), thus investing
funds released by the reduction of business loans as well as the
reserves freed by the lowering of legal reserve requirements.
T r e a s u r y C a sh P o s itio n

During recent months the Treasury has attained a very com­
fortable cash position despite the fact that cash operating outgo
has been in excess of cash receipts. In the third quarter of this
year the General Fund balance rose approximately 2.2 billion
dollars to 5.7 billion on September 30, although Treasury dis­
bursements on a cash basis during the quarter were 400 million
dollars larger than income. At the end of September, the Gen­
eral Fund balance was the highest since the period of heavy
tax receipts in March 1949. The Treasury raised only 500 mil­
lion dollars (net) through offerings of marketable securities

FEDERAL RESERVE B AN K OF NEW YO R K

(an increase of 800 million in Treasury bills being partly
offset by redemptions of other securities), and most of the
increase in the General Fund balance came from net sales of
nonmarketable issues, principally Savings notes.
Attracted by the higher rate of interest paid on the new
series of Savings notes, when held to maturity, investors have
increased their purchases substantially since April of this year,
and in the third quarter net sales after redemptions brought 2
billion dollars into the Treasury. Net sales reached a peak in
August. Although dropping considerably in September and
October, they remained higher than in the early months of
the year.
The excess of Treasury cash expenditures over receipts
widened during October, as current revenues fell seasonally.
The balance in the General Fund consequently decreased con­
siderably, but the Treasury’s cash position still remained ade­
quate to cover current disbursements, including voluntary cash
redemptions of Treasury issues, and leave an adequate amount
for requirements during the next few months. Should the
Treasury's needs for funds in the remainder of the fiscal year
(ending June 30, 1950) roughly approximate present expecta­
tions, it appears that the funds which the Treasury will obtain
from current revenues and from further (net) sales of Savings
notes and bonds, together with the accumulated General Fund
balance, will be sufficient to meet needs through the first
quarter of 19 5 0 , including payment of that part of a projected
cash dividend of 2.8 billion dollars on the life insurance of
veterans which will have been processed by the Veterans’
Administration by March 31.
The major part of the recent increase in the Treasury’s bal­
ances has taken the form of an increase in funds held in special
depositary accounts with commercial banks, since the proceeds
of the sales of Savings notes and bonds, as well as certain tax
receipts, are largely deposited in such accounts. Because a
large proportion of Savings note sales were made in New
York, Government deposits in New York City commercial
D eposits in and W ith d raw als from G overnm ent A ccou n ts in
Com m ercial B anks
(D ollar am ou nts in m illions)
Withdrawals#

Deposits*

1949
January............
February..........
March...............
April..................
M ay................ .
June..................
July...................
August..............
September........
October.............

Central re­ New York
Central re­ New York
serve New as a percent­
serve New as a percent­
age of all
age of all All commer­ York City
All commer­ York City
banks
cial banks
bankst
banks
cial banks
bankst
$1,333
2,250
2,538
2,171
1,383
1,059
1,042
2,330
2,715
3,140

$230
423
458
369
268
251
277
908
900
916

17
19
18
17
19
24
27
39
33
29

$1,370
178
923
2,124
1,326
1,347
1,942
1,034
568
1,214

$270
39
148
385
243
294
545
363
194
376

20
22
16
18
18
22
28
35
34
31

* Averages of Wednesday figures.
# Totals for the weeks ended Wednesday.
t Figures relate to 35 central reserve city banks through August, 34 in September, and 25
in October; the reduction in the number of banks, however, affects the figures only slightly.




123

banks rose more rapidly than elsewhere, as shown in the
accompanying table. Treasury withdrawals of funds from its
depositary banks are made in the form of 'calls” involving
fixed percentages of its deposits held in all depositaries
(grouped, according to size, in Class A and Class B banks).
As a result, there has been an increase in the proportion of
total withdrawals payable by New York City banks. W ith­
drawals from Government deposit accounts in New York cen­
tral reserve city member banks rose, as indicated in the table,
from 18 per cent of the total withdrawals during April and
May to 31 per cent during October. Thus the New York
money market has supplied an increasing proportion of those
Treasury disbursements which have been met with funds with­
drawn from commercial banks. Similarly, the excess of
Treasury disbursements over receipts has from time to time
been relatively smaller in New York than in other parts o f the
country. An offset to this situation, however, has been the
persistent inflow of funds to New York for investment in
recent months.

CHANGE IN RESERVE REQUIREMENTS
FOR MEMBER BANKS
Effective October 6 , 1949, nine New York City member
banks located in the Borough of Manhattan which had been
classified as central reserve city banks were granted permission
to maintain the lower reserve requirements of reserve city
banks. The Board of Governors of the Federal Reserve
System granted this permission under the provisions of Sec­
tion 19 of the Federal Reserve Act, which authorizes the
Board to permit banks in outlying sections of central re­
serve and reserve cities to carry reduced reserves.1 The action
taken by the Board of Governors was in the form of a ruling
which read in part as follows:
" . . . a bank located in the Borough of Manhattan north
of the downtown area as hereinafter described, and having
no branch in such downtown area, will be regarded as
being located in an ‘outlying district’ of the City o f New
York within the meaning o f paragraph 5 of Section 19
of the Federal Reserve Act and eligible for permission to
maintain the reserves required to be maintained by banks
located in reserve cities. The downtown area, member
banks in which would continue to be classified as central
reserve city banks, is bounded by the Hudson River, the
East River, Canal Street from the Hudson River to East
Broadway, and Rutgers Street from East Broadway to East
River.”
The nine member banks affected by the Board of Gov­
ernors’ ruling are all relatively small. In all, they currently
1 The New York State Banking Board announced on October 6,
1949, similar reductions in reserve requirements for State banks
similarly situated that are not members of the Federal Reserve System.

124

MONTHLY REVIEW, NOVEMBER 1949

account for less than 2 per cent of the total demand and time
deposits of all New York City member banks. The amount
of reserves released by the new ruling was, therefore, pro­
portionately small.
Reclassification of the nine banks under the authority of
Section 19 of the Federal Reserve Act was the only way
in which the reserve requirements of member banks which
clearly do not possess the main features associated with the
business of central reserve city banks could be reduced below
those of "true” central reserve city banks. The present law
authorizes the Board of Governors to make adjustments on
a geographical basis only; under it the Board cannot alter
the reserve classification of banks on an individual basis in
order to take into consideration the character of their business
rather than their location. The Federal Reserve Act permits
changes in reserve classifications to be made only for those
banks that are ". . . located in the outlying districts of
a reserve city (or central reserve city) or in territory added
to such a city by the extension of its corporate charter. . . .”2
The changes in classification which are thus permitted can be
in a downward direction only.
Many criticisms have been raised against the existing
method of fixing reserve requirements because within a given
area it affects all banks alike, irrespective of the size of the
banks involved and of the nature of their business. Small
banks doing almost exclusively a local business must, if they
are located in a central reserve or reserve city, maintain reserves
comparable to the reserves required of banks with large and
active correspondent bank accounts. On the other hand, there
are a number of instances where a large bank holding a con­
siderable amount of deposits of other banks, and with very
active deposits, is situated in a locality where it must be
classified as a "country” bank, and is consequently subject to
smaller reserve requirements than institutions doing a very
similar type of business, but located in a locality classified as a
reserve city.
2 See paragraphs 4 and 5, Section 19, Federal Reserve Act.

THE TREND OF BUSINESS
The spread of industrial shutdowns resulting from the coal
and steel strikes was the outstanding feature of the business
situation during October. The rising tendency in production
and sales which had been evident in August and September
was reversed in October, while unemployment insurance claims
began to increase again, after having declined since mid-July.
Retail trade appeared to be adversely affected by the unemploy­
ment and uncertainty over jobs, while railway freight move­
ments were very sharply reduced.
A survey made in mid-October by the United States Depart­
ment of Commerce indicated that by November 1 approxi­




mately two million workers (including strikers) affected by
the coal and steel walkouts would be without jobs. At the end
of October about 380,000 bituminous coal miners were start­
ing the seventh week of their strike, although the anthracite
miners had returned to work on October 3. Soft coal had been
mined at a reduced rate for several months prior to the strike,
but nevertheless coal stocks were still fairly ample when the
walkout started. Consequently, the coal strike had had rela­
tively little effect on business until the last week in October.
At that time, railroads with less than 25 days’ supply of coal
were ordered by the Interstate Commerce Commission to cut
their schedules for coal-burning passenger trains by one fourth.
In the steel industry, half a million basic steel workers were
on strike throughout October, and after the middle of the
month nearly half a million more employees of steel fabricating
plants either went on strike as contracts expired or were laid
off as steel supplies dwindled. Less than 10 per cent of the steel
industry’s basic capacity was in operation during October.
During the summer, there had been some stocking of steel
by manufacturers in anticipation of a strike, but by the end of
October layoffs and plant closings were increasing, as steel
inventories became depleted. Production was limited in some
cases by shortages of certain component parts or special types
of steel, and steel warehouses were swamped with orders.
During October, the automobile industry was able, through the
use of its stocks, to maintain a relatively high rate of opera­
tions, assembling nearly 120 ,0 0 0 passenger cars and 20,000
trucks per week. It seemed likely, however, that most of the
major car manufacturers would be forced to stop production
by mid-November if the strike continued. Appliance and
machinery manufacturers were in much the same position.
On the whole, industrial production was estimated by the
Board of Governors of the Federal Reserve System to have
declined 11 Vi per cent between September and October, equal­
ing the low point reached at the time of the 19 46 steel strike
and otherwise the lowest since early 1 9 4 1 .
In the Second District, the strikes affected business condi­
tions during October much less than in other major manu­
facturing areas, because such a large proportion of this
District’s production consists of nondurable goods. The portion
of this District most seriously affected was the Buffalo area,
where over 20,000 workers were on strike at steel mills. In
Syracuse, Bridgeport, and Northeastern New Jersey also, some
steel and aluminum plants were closed. In the New York City
metropolitan area, however, the immediate effects were minor,
although a prolonged coal strike would affect utilities and lack
of steel would interrupt many heavy construction projects in
this area.
The influence of the coal and steel strikes will be felt for
some time after agreements are reached between the unions
and the companies. The creeping industrial paralysis generated

FEDERAL RESERVE BAN K OF NEW YO R K

by the coal and steel strikes will not end immediately with the
settlement of the disputes. Steel mills are expected to require
as much as two or three weeks to restore operations to their
prestrike level. Subsequently, demand will be intensified by
the considerable need for filling distribution pipelines and
restoring minimum working inventories.
An important consideration in evaluating the eventual effects
of the strikes is that to the extent that the welfare plans which
may be agreed upon are company-financed, industrial workers’
income will not be increased immediately, while production
costs will be increased by the amount of any such contribu­
tions. Moreover, the purchasing power currently being lost
by strikers is not likely to be offset by wage increases.
Until the economic picture was disrupted by strikes, it had
appeared that a definite turn towards business recovery was
under way. Employment, output, and orders showed marked
improvement in many lines during August and September.
Recovery was most pronounced in the nondurable goods lines,
and appeared to be primarily the result of increased buying
following a period of inventory adjustment. During the spring,
processors and distributors in general had bought less than
they sold and thereby had accounted for much of the decline
in production. By July, excess stocks had been largely worked

125

off, and buying was then increased to cover current needs. In
a few cases, stocks had been cut too sharply and were inade­
quate to meet the seasonal rise in demand. Consequently, buy­
ing was intensified and a shortage of goods for immediate
delivery resulted, particularly in certain textile and apparel
lines where producers were unprepared for the influx o f orders.
Apparel firms in this area, many of which had been closed
for vacation or seasonal slack periods in July, sharply increased
employment during August and September as a result of this
greater than seasonal rise in business. By mid-October, how­
ever, unemployment in the needle trades was rising again, as
the restocking pressure eased and the season passed its peak.
In September, the apparel industry was the only major New
York State industry to show an increase over September 1948.
All types of apparel firms shared in the advance, although
quite a number of marginal firms are reported to have been
eliminated this year. Activity in the dress industry rose par­
ticularly sharply. The women’s garment industry is expected
by trade sources to produce nearly as many units during the
fall season as it did last year, but total dollar volume is likely
to be lower because of price reductions.
Other nondurable goods industries in New York State, par­
ticularly those producing food products, textiles, paper, and

Nonagricultural Employment in the Second District and in the United States, 1947 to September 1949
(1947 average=100 per cent)

PERCENT

* Latest month available is August

PERCENT

PERCENT

PERCENT

1949.

Source: United States, U. S. Bureau of L abor Statistics; Second District, computed by the Federal Reserve Bank of New Y ork from data furnished by
the Departments of Labor of the States of N ew Y ork, N ew Jersey, and Connecticut.




126

MONTHLY REVIEW, NOVEMBER 1949

leather products, increased employment between July and Sep­
tember. On the whole, nondurable goods factories in this
State employed 13 per cent more workers in September 1949
than in July, compared with a gain of only 5 per cent in the
rest of the United States. Durable goods employment in New
York increased slightly between August and September for
the first time this year, but was still 1 2 per cent lower than a
year earlier. The number of workers rose in the electrical
machinery and metal products industries, but at shipyards and
glass factories employment was lower.
As the accompanying chart shows, the decline in employment
this year has been centered in manufacturing, both in this
District and in the country as a whole, while other types of
nonagricultural employment have been generally well main­
tained. Factory employment in the Second Federal Reserve
District reached its postwar peak much earlier, and subse­
quently declined further, than in the rest of the country. Second
District manufacturers employed more workers in February
1947 than in any other month since the end of the war, but
in the country as a whole the postwar peak was not reached
for another year and a half. The early peak in this area reflected
primarily the predominance of consumers’ nondurable goods
manufacturing in the Second District; having few reconversion
problems, these firms expanded output and employment rapidly
after the war. The marked spring and fall seasonal peaks in
manufacturing employment in this District, characteristic of
the apparel industry, have been successively lower for each
season since the spring of 1947. In the country as a whole,
factory employment averaged somewhat higher in 1948 than
in 1947, but in the Second District the reverse was true.
Reflecting in part the more pronounced seasonal fluctuations
in the Second District, factory employment in the District
showed a sharper decline between September 1948 and July
1949, and a more marked recovery between July and September
of this year, than in the country as a whole.
Employment in other nonagricultural industries has, on the
whole, remained consistently above the 1947 level so far this
year, in both the Second District and in the United States as
a whole. There has been a fairly close correspondence between
the changes in such employment nationally and in the District,
and in recent months employment in these lines in both areas
has been two or three per cent above the 1947 average and
only slightly below the corresponding months of 1948. Con­
struction and government employment has risen substantially
above the 1947 level, while transportation and public utilities
have been employing about 3 per cent fewer workers than in
1947, in both this District and the country as a whole. The
rise in financial employment in New York State (3 per cent
above the 1947 average) was markedly less than in New Jersey
( 1 1 per cent) and in the country as a whole (9 per cent).
Wholesale and retail trade in these areas employed about the
same number as in 1947.




The over-all level of consumers’ expenditures held up better
than business in general during the recent decline, indicating
that it was the reduction in buying by business, rather than
by consumers, that caused the recession. While retail sales
declined in most lines, a rise in the volume of automobile sales
offset in large part the declines elsewhere. In a survey o f 40
different types of independent retail stores in New York City,
the U. S. Department o f Commerce reported that motor
vehicle dealers were the only retailers to report a higher dol­
lar volume of sales in the first eight months of 1949 than in
the corresponding period of 1948. According to this report,
department stores in New York City showed a 9 per cent
decline in dollar volume, apparel sales were down 8 per cent,
food stores sold 5 per cent less, and sales losses in other lines
ranged up to 22 per cent. But a 14 per cent year-to-year gain
in motor vehicle sales cut the over-all decline in New York
City retail sales for the first eight months of this year to 6 per
cent. Despite some decline in consumers’ prices this year, this
drop in the dollar volume of sales indicates a slightly lower
unit volume in most lines. One consequence of these declin­
ing sales and of the expiration of Federal Reserve consumer
credit regulations has been a competitive loosening of credit
terms.

UNITED STATES FOREIGN TRADE
SINCE THE WAR
Although it is too early to appraise the effects of the recent
currency devaluations on the foreign trade of the United States,
a review of our postwar trade at this time appears desirable
in any event because of the light it can throw on the
relationships between foreign and domestic economic trends
since the war. Such an analysis will also be an essential basis
for any estimate of the effects of foreign currency devaluations
on our trade. The devaluing countries accounted in 1948 for
62 per cent of our exports and 51 per cent of our imports.
The value of both exports and imports of the United States
since the war has reached levels unprecedented in the history
of our foreign trade. Exports reached their all-time peak in
1947, when they totaled 14.4 billion dollars.1 Imports were at
their highest in 1948, when they amounted to 7 .1 billion dol­
lars. The enormous postwar rise in the value of our exports was
caused in part by the upsurge in the foreign demand for Ameri­
can foodstuffs, raw materials, capital equipment, and consumers’
manufactured goods, which of course resulted in turn from
the destruction and wearing out of production facilities abroad
during the war and from the absence of alternative sources of
supplies. In part the rise in the dollar volume o f United States
exports was also due to the inflationary rise of prices in this
country, which lifted the average price of our exports to twice
1 Including Army Civilian Supply shipments, the total of 1947
exports was 15.3 billion dollars. However, A.C.S. shipments have
been included in the foreign trade statistics only since 1948.

FEDERAL RESERVE BANK OF NEW YO RK

the 1936-38 level. Exports receded somewhat to 12.7 billion
dollars in 1948, but rose again to an annual rate of 13.4 billion
in the first six months of 1949.2
Reflecting the extremely large volume of exports, the United
States export surplus from the beginning of 1946 to June 1949
has ranged, on an annual basis, between 4.8 and 8.7 billion
dollars. This trade surplus, together with a substantial surplus
on service accounts, was financed in part by loans and grants
of the United States Government under various aid programs
(UNRRA, Army relief, post-UNRRA aid, Greek-Turkish aid,
Interim Aid, and the European Recovery Program) and under
special loan agreements (especially the Treasury loan to the
United Kingdom, and the Export-Import Bank loans to
France), by disbursements of the International Bank for
Reconstruction and Development and the International Mone­
tary Fund, and (to a smaller but appreciable extent) by an
outflow of private American capital. The sums forthcoming
from these sources, however, proved insufficient, and almost
all foreign countries had in addition to draw on their dollar
and gold reserves, which in many instances were progressively
depleted.
Despite its extent, the postwar outflow of American goods
was not an abnormally large drain on our physical or (so far
as it was financed by this country) financial resources. Only
in the peak year 1947 did the value of our exports amount to
substantially more than one twentieth of our gross national
product. In the other postwar years the proportion ranged
between 4.6 and 5.1 per cent, as indicated by Chart 1.
Since the war, imports have been not only larger than ever
before in value, but also very high in physical volume com­
pared with the in ter-war period. Nevertheless, they have been
below normal if the ratio of imports to gross national product
that prevailed in the twenties is considered indicative of the
normal American import demand at a high level of business
activity. Between 1922 and 1929, this ratio was always in
excess of 4 per cent; in 1946, 1947, and 1948, however, it
amounted to 2.3, 2.4, and 2.7 per cent, respectively, and in the
first six months of 1949 it was 2.6 per cent. These postwar
ratios, it is true, do not compare unfavorably with the import
ratios of the thirties, which for the most part fluctuated
between 2.3 and 2.9 per cent. But it is clear that our postwar
imports have been abnormally low for a period of exceedingly
high business activity in this country. The failure of imports to
recover more rapidly during the early postwar years was
attributed to the supply difficulties of foreign producers. More
recently, the lag in our imports was ascribed in part to the fact
that some foreign countries had priced themselves out of the
American market. To some extent, however, the low level of
our imports in terms of national income must also be regarded

127

Chart I
United States Exports and Im ports as a Percentage o f
Gross National Product

S ource: Computed from U . S. Department o f Commerce figures by Federal
Reserve Bank of New York.

as the result o f structural changes in the American import mar­
ket which may be hard to overcome merely by price adjust­
ments like those expected from the recent devaluations.
Changes

in t h e

G e o g r a p h ic a l P a t t e r n

of

T rade

The postwar expansion of exports has not been evenly
distributed among the various foreign areas. As was to be
expected (and as shown in Table 1 and Chart II), the largest
absolute increases in exports occurred in our trade with the
countries which participate in the European Recovery Pro­
gram. On the average this group o f countries has been obtain­
ing each quarter 900 million dollars’ worth of goods more
than before the war. Exports to most other areas also increased
substantially. Shipments to the Latin American republics in
1947 and early 1948 were 700 million to 800 million dollars
higher per quarter than before the war; more recently they
have declined somewhat, partly because of the partial satisfac­
tion of the wartime backlog of demand for American goods,
and partly because of the tightening o f import and exchange
controls in countries whose gold and dollar reserves have
declined. Our postwar exports to Canada (including New­
foundland) and to the “rest of the world ,”3 have in each
instance been approximately 400 million dollars larger per
quarter than before the war.
More important than the absolute gains, however, have been
the relative increases. In terms o f the latter, the order of the
various markets for our exports is quite different. Exports to
the ‘ rest of the world” in 1948 were seven times as high as

2 These figures include Army Civilian Supply shipments, which are
3 Asia, Africa, and Oceania (other than sterling area countries) and
not shown separately in the foreign trade statistics for 1948 and 1949.
the French and Dutch possessions in the Western Hemisphere.




MONTHLY REVIEW, NOVEMBER 1949

128

Table I
U nited S tates E xports and Im ports b y M ajor Areas'}*
(In m illions o f dollars)

Other Europe

Imports Exports

Other sterling
area#

Imports Exports

Canada and New
Foundland

Imports Exports

Latin America
(20 republics)

Rest of world

Imports

Exports

Imports

742

622

285

156

31

29

123

126

116

88

121

136

66

8
8

Exports
1936-38J..........................................

E R P countries*

Total

Quarterly total

Imports Exports

Imports Exports

1946

January-M arch................
April-June.........................
July-September................
October-D ecem ber..........

2,284
2,485
2,352
2,620

1,096
1,181
1,230
1,402

836
849
766
831

143
175
166
198

291
258
214
103

52
48
40
50

148
176
169
208

219
177
215
226

270
3 0
394
469

190
212
238
270

433
498
489
680

410
445
426
479

306
375
321
329

82
125
147
180

1947

January-M arch................
April-June.........................
J uly-September................
October-Decem ber..........

3,586
3,943
3,411
3,490

1,412
1,449
1,323
1,549

1,267
1,321
1,175
1,089

173
166
161
198

130
159
84
92

36
45
56
46

353
441
386
389

270
254
198
242

481
585
512
533

249
274
279
323

931
1,026
900
1,001

529
557
495
569

425
412
355
385

154
154
135
171

1948

January-M arch................
April-June.........................
J uly-September................
October-Decem ber...........

3,315
3,237
2,937
3,162

1,810
1,710
1,729
1,874

1,141
1,059
968
1,017

235
232
228
274

84
33
38
39

46
48
48
42

303
345
304
319

302
273
248
254

431
501
493
521

336
364
420
473

858
841
681
778

652
584
530
572

498
458
454
489

240
209
256
259

1949

January-M arch................
April-June.........................

3,324
3,357

1,791
1,602

1,119
1,169

250
190

40
45

33
32

300
320

263
237

471
571

•°80
382

782
686

625
548

612
566

240
214

t Exports, including re-exports, and general imports.
* Austria, Belgium, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Trieste, Turkey,
and United Kingdom.
# All sterling area countries which are not E R P countries.
X Quarterly average.
Source: U. S. Department of Commerce, U. S. Foreign Trade— Trade by Country.

before the war in value, and in the first six months of 1949
more than eight times as high. Purchases of American goods
by Latin American countries after the war recorded a sixfold
rise; exports to Canada were four times as large. Exports to
ERP countries, however, were only three times prewar despite
large-scale United States aid, and shipments to the "other”
sterling area countries (i.e., other than the United Kingdom,
Ireland, and Iceland, which are included in the ERP group of
countries), two and one-half times prewar. Primarily because
of large U NRRA shipments, deliveries to the European coun­
tries not participating in the European Recovery Program were
eight times larger in early 1946 than before the war. Since
the beginning of the Marshall plan, however, total shipments
to such countries have fallen to the prewar level, measured by
value; in terms of physical volume, they have declined to only
about half of prewar.
The variation in the rates of increase of our exports to vari­
ous regions has resulted, of course, in appreciable changes
since the war in the relative importance of the various regions
as markets for American goods. The share of Europe in United
States exports has fallen from the prewar level of 43 per cent
to about 35 per cent, and that of the "other” sterling area
from 17 per cent to about 10 per cent. Canada now absorbs
the same proportion (15 per cent) of the total as before the
war. Latin America and the "rest of the world”, on the other
hand, have gained in relative importance. Before the war,
Latin America absorbed only one sixth of our exports; in 1948
the proportion had risen to one fourth. The "rest of the
world” accounted for 9 per cent of our total exports before the
war and 15 per cent after the war.
It is not yet clear whether these various shifts in our export
trade are permanent, or whether they are only a temporary




result of the dislocations wrought by the war. Their current
significance lies rather in their effects on areas which in the
past had net dollar surpluses with the United States and thus
supplemented the dollar earnings of Europe. Our exports to
those areas have risen so much that their former dollar sur­
pluses have been converted into dollar deficits, and this in
turn has complicated the problem of Europe’s "dollar shortage.”
The rather uneven distribution of the threefold expansion of
American imports since the war has been another major source
of the balance-of-payments difficulties that most of the Western
European countries, the members of the sterling area, and
some Latin American countries are experiencing. The West­
ern European countries, whose purchases from the United
States have expanded by the largest amount, have increased
their sales to the United States by a smaller amount than any
other major group of countries except "other Europe”. Ameri­
can imports from ERP countries reached their prewar value as
early as 1946 and continued to expand until the end of 1948,
but they have fallen off fairly sharply in 1949. In the second
quarter of this year, the aggregate value of our imports from
the ERP countries was only 23 per cent above the 1936-38
level, although the dollar prices of such imports probably
average about twice the prewar level. Our imports from the
Western Hemisphere, on the other hand, have risen approxi­
mately fourfold, thus providing the dollars to pay for most
of our increased exports to this region. While our exports
to Latin American countries have declined somewhat in 1949,
imports from that area have remained only slightly below the
record levels of last year.
The failure of Western Europe to sell more in the United
States has almost halved the share of the ERP countries in
total American imports. Before the war one fourth of such

129

FEDERAL RESERVE BANK OF NEW YO RK

imports were recorded as coming from the countries now par­
ticipating in the ERP; in 1949, only 13 per cent came from
those countries. American purchases from the "other” sterling
area similarly shrank from 20 to 15 per cent of our total
imports. Canada and the Latin American republics, on the
other hand, recorded net gains, their shares in our total imports
rising from 14 to 2 2 per cent and from 2 2 to 35 per cent,
respectively.
C h a n g e s in C o m m o d it y C o m p o s it io n

These postwar changes in the regional distribution of Ameri­
can trade went hand in hand with changes in its commodity
composition. The share of finished manufactured goods in the
aggregate value of American exports, which had been rising
for many decades, expanded even further after the war,
increasing from 49 per cent before the war to 58 per cent in
1947. Since then, exports of industrial products have declined
somewhat, largely because the boom in textile exports came

to an end with the expansion or restoration of textile manu­
facturing abroad, and because the sales of merchant vessels
from war surplus stocks fell off. Exports of investment goods,
such as iron and steel mill products, electrical equipment, and
industrial machinery, stayed at their record levels of 1947.
Exports of agricultural machinery, limited immediately after
the war by supply difficulties, later expanded considerably and
are still rising, while shipments of cars and trucks have appar­
ently passed their postwar peak. Among raw material exports,
shipments of coal, which exceeded 600 million dollars in 1947,
have fallen somewhat due to the curtailment of shipments to
Europe, but they are still considerably above their prewar level.
Although the physical volume of cotton and tobacco exports
failed to rise in the postwar years above their prewar levels,
their aggregate value increased substantially because of high
prices. Cotton exports were considerably aided by transactions
of the Commodity Credit Corporation with Germany and
Japan.

Chart II
United States Exports and Imports by Major Areas
(Quarterly totals)

M ILLIONS
OF D O L L A R S

3 8 AVG.

MILLIONS
OF D O L L A R S

MILLIONS
OF D O L L A R S

3 8 AVG.

3 8 AVG.

* See footnote to Table I.
# See footnote to Table I.
S ource: U . S. Department o f Commerce, United States Foreign Trade— Trade by Country.




MILLION S
OF DO LLA R S

3 8 AVG.

130

MONTHLY REVIEW, NOVEMBER 1949

The largest postwar percentage increases were recorded in
food exports, which rose eight to ten times, from the prewar
annual average of 300 million dollars to close to 3 billion dol­
lars in 1947 and to 2.6 billion in 1948. During the first six
months of this year, approximately the same annual rate of
food exports prevailed as in 1948. The postwar increase in
food exports was concentrated primarily in wheat and wheat
flour, which by weight were eight times as large as in the last
prewar years (when, however, exports were abnormally low
because of the 19 3 6 drought), and by value were 20 times the
prewar amount.
The postwar changes in the commodity composition of
imports were less pronounced than those in exports, but never­
theless very substantial shifts occurred among the various cate­
gories. The United States became for the first time a net
importer of petroleum and petroleum products, although in
value terms exports in this category still exceed imports because
TaW e II
U nited S tates E xports and Im ports b y
M a jo r C om m odity Groups
(In m illions o f dollars)
Commodity groups and selected
commodities
D O M E S T IC E X P O R T S
Crude materials..........................................
Cotton unmanufactured.......................
Tobacco unmanufactured....................
Coal
..................................................
Semimanufactures ....................................
Iron and steel semimanufactures.........
Foodstuffs ................................................
Wheat and wheat flour..........................
Fruits and vegetables............................
Meat products.................. .....................
Finished manufactures..............................
Agricultural machinery..........................
Industrial machinery.............................
Electrical machinery and apparatus...
Iron and steel mill manufactures........
Passenger automobiles..........................
Trucks and busies................................
Textile manufactures.............................
Merchant vessels..................................
Total ..........................................
IM P O R T S FO R CON­
S U M P T IO N
Crude materials..........................................
Crude petroleum................................
Nonferrous ores..................................
Crude rubber..........................................
Wool, unmanufactured..........................
Undressed furs........................................
Tobacco, unmanufactured..................
Oilseeds....................................................
Jute and jute butts..............................
Semimanufactures......................................
Tin
....................................................
Copper....................................................
Gas and fuel oil......................................
Fertilizers ..............................................
Woodpulp................................................
Foodstuffs....................................................
Coffee.....................................................
Cocoa and cocoa beans..........................
Meat products....................................
Cane sugar ..........................................
Alcoholic beverages................................
Finished manufactures..............................
Newsprint.......................................... ..
Machinery and vehicles........................
Burlap......................................................
Other textile manufactures...................
Total............................................

1936-38
average

1946

1947

1948

1949*

1,417
537
352
302
894
235
2,172
610
296
434
5,019
158
842
304
447
123
231
731
126

1,596
416
271
622
1,777
436
2,944
899
279
227
8,661
318
1,337
563
825
335
445
1,375
628

1,489
503
215
479
1,367
316
2,582
1,394
269
129
7,058
382
1,249
491
650
280
352
844
255

2,030
1,039
184
385
1,542
407
2,522
1,159
213
168
6,971
480
1,426
468
838
231
272
739
150

2,925

9,501

14,978

12,497

13,065

760
19
156
179
57
65
33
28
7
503
75
36

1,700

1,744
162

1,244
43
144
85
32
257
1,672
600
152
23
410
65
983
343
67
109
94

2,147
283
152
313
307
158
78
151
26
1,632
104
178
126
43
272
2,003
696
193
90
313
83
1,309
413
154
131
156

1,907
341
274
263
193
104
74
92
43
1,460
132
199
114
57
181
2,046
731
161
57
419
76
1,279
218
162

5,642

7,091

6,693

669
313
142
56
519
148
306
62

100

43
1,431
65
227
105
199
113
76
87

1

20
101
37

720
141
35
32
152
69
478
107

21
110
35

2,461

102

61
234
289
232

86
12

53

929
19
78
56

21

135
1,318
470
56
17
196
85
845
241
44
77

102

4,793

101
121
11

323
209
91
139

* Annual rate based on January-June 1949.
Source; U. S. Department of Commerce, U. S. Foreign Trade-Trade by Commodity.




112

138

of the higher values of the finished products which are
exported. Imports of nonferrous ores were, in aggregate value,
below the prewar level until the end of 1948, but have
expanded sharply in 1949, as have tin and copper. Imports of
wool and burlap, which rose sharply in 1948, fell off in the
first six months of 1949, reportedly in anticipation of the
sterling and rupee devaluations. Imports of crude rubber rose
steadily after the end of the war; by 1946 they had exceeded
their prewar aggregate value, and by 1947 their prewar vol­
ume. However, they undoubtedly were adversely affected by
the competition of synthetic rubber, particularly since the price
of synthetic rubber tends to set an effective ceiling on the
price of crude. Food imports tripled in value after the war,
primarily because we now buy annually almost one billion
pounds more of coffee than before the war, at prices roughly
three times as high. Imports of sugar and cocoa are at approxi­
mately their prewar volume, but their value exceeds the pre­
war figure severalfold. Imports of alcoholic beverages, which
constitute an important part of imports from Europe, have
remained close to the prewar level, in both volume and value.
Imports of finished manufactures in the past two years,
measured by value, have been almost three times as large as
before the war. This surprising increase reflected an appar­
ently permanent rise in imports of newsprint, and a very large
expansion of imports in the ‘ machinery and vehicles” cate­
gory. The latter is largely accounted for by presumably tem­
porary increases in imports of Canadian agricultural machinery
and European motor vehicles. The failure of Western Euro­
pean countries to regain their former share in the greatly ex­
panded American consumers’ goods market is apparent in the
figures of textile imports. The value of the latter stayed below
the prewar figure until 1947, and although it rose further in
1948, it declined again in 1949. Measured by quantity, textile
imports throughout the postwar period have remained very
much below the prewar level.
As to the outlook for the immediate future, several months
will have to elapse before there can be any clear evidence that
the recent currency devaluations are making themselves felt
through an expansion of United States imports and a decline
of United States exports; nor is it clear whether the impact is
likely to be greater upon imports or upon exports. The
devaluations apparently came too late to cause increased imports
for the Christmas season. In any event, no drastic and rapid
changes in short order should be expected. Although the com­
petitive position of foreign producers in many lines of mer­
chandise has undoubtedly been improved by devaluation, they
still have to face the arduous task of winning or regaining a
larger share of the American market through improved mar­
keting and merchandising. Their ability to earn more dollars
will largely determine also the future of American exports, the
larger share of which even now is being paid for through

FEDERAL RESERVE BAN K OF NEW YO R K

shipments to this country. W ith ERP aid scheduled to end
in 1 9 5 2 , intensive sales efforts of foreign sellers may thus be
the determining factor in the long-run level of both American
exports and American imports. However, the lowering of
import duties by the United States through the Geneva Trade
Agreements of 1947, supplemented by the American con­
cessions granted recently in Annecy, and our promised review
and simplification of customs practices, should also be of
appreciable help in maintaining the level of our trade with
the outside world.

DEPARTMENT STORE TRADE
Unlike August and September sales, which showed a morethan-seasonal rise, October sales at Second District department
stores fell below seasonal expectations. They were only slightly
greater than in September and, according to a preliminary
estimate, the dollar volume of sales was fully 10 to 1 2 per cent
less than in October 1948. Unusually warm weather undoubt­
edly was a deterrent to consumer shopping, particularly for
outerwear and other fall and winter lines in which business
is usually brisk by mid-October, but other factors were probably
also present.
R e c e n t In v e n t o r y Po l i c y

Marking a reversal of the inventory curtailment policy in
effect since the end of the Easter season, during September
the stores increased the dollar volume of their stocks by about
twice the usual percentage. Stocks had reached an exceptionally
low level by the end of August, possibly so low in some depart­
ments as to cause a loss of sales owing to inadequate selections.
Whereas at the end of August the retail value of stocks had
been 16 per cent less than one year previous, by the end of
September the year-to-year decrease was reduced to 12 per
cent. However, this left stocks still fairly low relative to sales,
which during September ran only 5 per cent less than a year
earlier ( and for the entire January-September period only 7
per cent less than a year previous). Housefurnishings stocks
were particularly low, 19 per cent less than on September 30,
1948, while women’s wear and men’s wear stocks were down
by 10 and 8 per cent, respectively.
During the last week or two of August, and continuing
through September, the stores considerably accelerated their rate
of ordering from wholesalers and manufacturers. Several simi­
lar spurts in the last year or two appeared to involve mainly
the seizing of promotional opportunities. The most recent
spurt, however, was largely a matter of rebuilding basic inven­
tories closer to the rate of consumer spending.
The dollar amount of new orders placed during September
was more than 25 per cent greater than in the corresponding
month last year. It was much greater proportionately to sales,
notwithstanding the relatively favorable sales volume recorded




131

Department Store Sales by Type of Merchandise
Second Federal Reserve District
(Percentage decreases, January-September 1948 to 11949)

per c e n t

0

-10

Women’s
wear

Men's
wear

Small
wares

Piece
goods

House­
furnishings

10

PER CENT

UJJJI

in September. Because of the usual lag between orders and
deliveries, outstanding orders expanded sharply; by September
30 they were within 9 per cent o f the year-ago amount, in
contrast to gaps of 25 to 45 per cent earlier this year.
Sa l e s T r e n d s i n M a j o r D e p a r t m e n t s

While their sales have lagged from year-ago levels, Second
District department stores have maintained a fair degree of
"internal” sales stability. Individual departments have shown
the usual considerable dispersion in sales volume trends, but
the sales of major departmental groups have shown, through
September, a fairly uniform rate of change from last year’s
levels. This situation is in contrast to that of previous years,
when the emergence of radically altered styles and the filling
of the backlog demand for durables led to very wide varia­
tions in year-to-year changes in sales among the major types
of merchandise. Thus, while the various clothing lines during
the first 9 months o f 1949 showed considerable disparities
(for example, millinery gained 4 per cent and hosiery lost 10
per cent), aggregate clothing and closely related accessories,
both women’s and men’s, showed much the same drop in sales
as small wares, piece goods, and housefurnishings.1 As the
accompanying chart shows, declines for the 9 -month period
January-September ranged from 7 per cent in the case of
women’s wear to roughly 10 per cent for housefurnishings, a
spread of only 3 percentage points. (The range for the five
groups in the corresponding period of 1948 as compared with
1947 was from a decline of about one per cent to a gain of
approximately 1 1 per cent.)
1 This discussion is confined to main store sales, which account for
about 90 per cent of total sales. The addition of basement store sales
would not materially affect the conclusions, however.

132

MONTHLY REVIEW, NOVEMBER 1949

D epartm en t and Apparel Store Sales and Stock s, Second Federal R eserve
D istrict, Percentage Change from the Preceding Y e a r

Indexes of D epartm en t Store Sales and Stocks
Second Federal R eserve D istrict
( 1 9 3 5 -3 9 a v e r a g e s 1 0 0 per cen t)

Net sales
Locality
September

1949
Department stores, Second District----Northern New Jersey..............................
Newark.....................................................
Westchester County.................................
Fairfield C ou n ty........................................
Bridgeport...............................................
Lower Hudson River Valley................
Poughkeepsie. ........................................
Upper Hudson River V alley.................
Albany.......................................................
Schenectadv............................................
Central New York S tate.......................
Mohawk River Valley........................
Utica.....................................................
Syracuse...................................................
Northern New York State....................
Southern New York State.....................
Binghamton............................................
Elm ira.......................................................

Western New’ Y ork State....................
B uffalo......................................................
Niagara Falls..........................................

R ochester............................................
Apparel stores (chiefly New Y ork C ity ).

-

5

— 6
— 2
— 4
+ 4
- 8
- 9
- 3
- 4
- 7
-1 4
— 4
- 2
-1 0
- 8
+ 1
- 8
-1 2
-1 3
- 7

-

7

-1 2

3
-1 5
- 7

- 8
— 7
— 8
+ 5
- 9
-1 0
— 5
- 4
- 4
— 6
- 2
— 7
-1 0
- 9
- 6
— 6
- 9
- 9
- 9
- 4
- 2
- 6
- 8

— 13
— 8
— 7
— 2
-1 4
-1 4
-1 1
-1 2
— 15
-2 1
- 8
-1 2
-1 8
-2 0
- 7
-2 2
-1 6
-1 7
— 15
-1 3
-1 0
-2 0
-1 5

-1 1

-

5

9




1949

Item
Sept.

July

August

Sept.

Sales (average daily), unadjusted.................
Sales (average daily), seasonally a d ju sted ..

257
254

155
222

171
234

243
241

Stocks, unadjusted............................................
Stocks, seasonally adjusted............................

257r
244r

189
213

204
204

225
213

-1 0

-

In recent months, one outstanding exception to the general
lag in sales has been the radio-television department, in which
third-quarter sales recorded a gain of more than 25 per cent,
after having shared the over-all lag during the first half of the
year. Summer promotion of television sets played a large role
in the outstanding performance of this department. New
models at lower prices have been continuously entering and
hence widening the market, while credit terms have been
liberalized. Major household appliances, on the other hand,
have not been in great demand, and in the July-September
period sales dropped 35 to 40 per cent below July-September
1948. Furniture sales decreased by 11 per cent over the same
interval.
In ready-to-wear departments, men’s wear registered a better
performance than women’s in the July-September period.
In contrast to an 8 per cent decrease for men’s wear, women’s
wear sales lagged by 1 1 per cent, apparel lagging substantially
more than accessories. The large volume dress and coat-andsuit departments had sales losses of 1 1 and 1 2 per cent,
respectively.

1948

Stocks on
Jan .th rough
hand
Sept. 1949 Sept. 30, 194!

r Revised.

Indexes of Business
1949

1948
Index
Sept.
Industrial production*, 1935-39 = 100.........
(Board o f Governors, Federal Reserve
System)
Electric power output*, 1935-39 = 100........
(Federal Reserve Bank o f New York)
Ton-miles of railway freight*, 1935-39 = 100
(Federal Reserve Bank of New York)
Sales of all retail stores*, 1935-39 = 100........
(Department of Commerce)
Factory employment
United States#, 1939 = 100........................
(Bureau of Labor Statistics)
New Y ork State, 1935-39 = 100................
(N Y S Div. of Placement and Unemp. Ins.)
Factory payrolls
United States#, 1939 = 100........................
(Bureau of Labor Statistics)
New Y ork State, 1935-39 = 100................
( NYS Div. of Placement and Unemp. Ins.)
Personal income*, 1935-39 = 100..................
(Department of Commerce)
Composite index of wages and salaries*}:,
1939 = 100.......................................................
(Federal Reserve Bank of New York)
Consumers’ prices, 1935-39 = 100.................
(Bureau of Labor Statistics)
Velocity of demand deposits*, 1935-39 = 100
(Federal Reserve Bank of New York)
New Y ork C ity ..............................................
Outside New York C it y ..............................

July

August

Sept.

192

161r

170

172p

252

255

258

255p

201

156

155p

340

328

329p

159

137

141

144p

128

106p

113p

118p

367

313

323p

306

247p

264p

315

306

308/)

194

199p

199p

175

169

169

170

104
93

105
88

110
89

106
89

283p

* Adjusted for seasonal variation.
p Preliminary.
r Revised.
# Revised beginning January 1941.
% A monthly release showing the 15 com ponent indexes of hourly and weekly
earnings in nonagricultural industries com puted by this bank will be sent upon
request. Tabulations of the monthly indexes, 1938 to date, may also be pro­
cured from the Research Department, Domestic Research Division.

NATIONAL SUMMARY OF BUSINESS CONDITIONS
(Summarized by the Board of Governors of the Federal Reserve System, October 28, 1949)

production and employment increased some­

disputes, were curtailed sharply in October. Department store

Output of most other nondurable goods was maintained in
large volume.
Minerals output has declined sharply since the middle of

sales were below seasonal expectations from mid-September to

September mainly as a result of work stoppages at most coal

the third week of October. Wholesale commodity price move­
ments were mixed, with only a small decline in the average

mines. Output of iron ore declined more than seasonally in

ndustrial

I

what further in September but, as a result of industrial

September and in October has dropped sharply as a result of

level. Construction activity continued at high levels. Stock

the steel labor dispute. Crude petroleum production, on the

prices advanced moderately and bond prices held firm.

other hand, has advanced in September and early October.
C o n s t r u c t io n

I n d u st r ia l Pr o d u c t io n

Production of manufactures advanced further in September
while output of minerals declined 8 per cent. The Board’s sea­
sonally adjusted total index was 172 per cent of the 1935-39
average as compared with 170 in August. The index is expected
to decline about 20 points in October largely as a result of the
steel strike.

Total value of construction contracts awarded increased sub­
stantially in September reflecting largely a further sharp expan­
sion in residential contracts to a new record rate. Awards for
public construction declined seasonally, following a marked
drop in August, but the value of public work done has been
maintained at a high level reflecting the large volume of
awards earlier this year.

Activity in durable goods industries rose about 2 per cent
in September, reflecting mainly increases in output of con­

Em p l o y m e n t

sumers’ durable goods and of metal building materials and

Employment in nonagricultural establishments increased
somewhat more than seasonally from mid-August to mid-

equipment. Activity in the machinery industries rose 4 per
cent in September, after declining steadily over the preceding
8 months with a total reduction of 22 per cent in that period.
With work stoppages at most plants, steel production was
curtailed to 9 per cent of capacity beginning October 1, com­
pared with 83 per cent in September.

September, but subsequently declined as a result of work
stoppages.
D istr ibu tio n

Department store sales did not show the usual seasonal
increase from the middle of September to the third week of

Output of nondurable goods rose about 3 per cent further

October. Value of sales during the second half of September

in September and was at the highest rate since February. Most

was 8 per cent smaller than in the corresponding period a year

of the gain represented continued very large increases at textile

ago and during the first three weeks of October sales were 13

and paper mills, in part reflecting seasonal influences. Cotton

per cent below a year ago. Department store sales had averaged

consumption expanded 14 per cent and September deliveries
of rayon to textile mills advanced to a new record rate. Paper­

about 6 per cent lower than last year during the first eight
months.

board output increased 10 per cent and was also at a new peak
rate. Petroleum refinery activity increased somewhat further.

Shipments of railroad revenue freight in the first half of
September continued at a level about 20 per cent below the

IN STRIAL PR D CTIO
DU
O U
N

CON
STRU
CTIO CONTRACTS AW
N
ARDED

PER CENT

Federal Reserve
September.

PHYSICAL VOLUME, SEASONALLY ADJUSTED,

index.




M onthly

figu res;

1935 - 39 ■ 100

latest

figure

PER CENT

shown

is

for

F. W . D odge Corporation data for 37 Eastern States.
latest shown are for September.

M onthly figures;

same period a year ago. Since the middle of September, how­

tember and the first three weeks of October in response to a

ever, freight carloadings have dropped sharply, mainly as a

seasonal rise in credit demand. Loans to consumers and real

result of curtailed shipments of coal, iron ore, and steel prod­

estate owners and holdings of U. S. Government and corporate

ucts, and in the week ended October 22 were 36 per cent

and municipal securities also increased.

smaller than in the corresponding week of 1948.
C o m m o d it y Prices

The general level of wholesale commodity prices decreased
somewhat from mid-September to the third week of October.
Prices of hogs and pork showed marked seasonal declines and
reductions also occurred in some other farm products and
foods. Cattle prices, however, advanced and coffee prices rose

Treasury deposits at Reserve Banks, which were large at
the end of September, were drawn down in the first three
weeks of October, supplying banks with a substantial volume
of reserve funds. Federal Reserve holdings of Government
securities and member bank borrowings at Reserve Banks
declined somewhat and member bank excess reserves increased
moderately.

sharply. Imported materials generally were lower in the third

Sec u r it y M arkets

week of October than in mid-September before many foreign
currencies were devalued, while prices of some domestic indus­
trial products such as cotton goods and tires were higher.

Common stock prices increased somewhat in the first three
weeks of October to a new high for the year. Prices of Govern­
ment securities and high-grade corporate bonds showed little

B a n k C redit

Business loans at banks in leading cities expanded in Sep­

change. The volume of new corporate security issues was
small in September and October.

CONSUM
ERS1 PRICES

1942

1943

1944

1945

1946

1947

1948

1949

*CHANGE IN SERIES.

Bureau of L abor Statistics’ indexes. “ A ll items” includes housefurnishings,
fuel, and miscellaneous groups not shown separately. Midmonth figu res;
latest shown are for August.




Excludes loans
October 19.

to

banks.

W ednesday

figu res;

latest

shown

are

for