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MONTHLY REVIEW of Credit and Business Conditions S e c o n d F e d e r a l Federal Reserve Bank, New York Federal Reserve Agent M o n e y M a r k e t in S e p t e m b e r A ccom panying a renewed demand fo r loans on secu rities, coincident with the beginning o f the seasonal de mand for credit and currency to finance crop m oving and autumn trade, interest rates fo r stock exchange loans, both call and time loans, have risen to the highest levels since early in 1921. D uring the first three weeks o f September call loan rates averaged about 7 % per cent, or approxim ately double the rates o f a year ago. ________________________________________ M o n e y R a t e s a t N e w Y o r k _______________________ S e p t . 3 0, 192 7 A u g . 3 0 , 1 92 8 S e p t . 2 8 ,1 9 2 8 *4 T im e m o n e y — 9 0 d a y ...................................... P r im e c o m m e r c ia l p a p e r ............................... B i l l s — 9 0 d a y u n in d o r s e d ............................. C u s t o m e r s ’ r a t e s o n c o m m e r c ia l lo a n s . T r e a s u r y c e r t if ic a t e s a n d n o te s M a t u r in g M a r c h 1 5 ..................................... F e d e r a l R e s e r v e B a n k of N e w Y o r k r e d is c o u n t r a t e ............................................... F e d e r a l R e s e r v e B a n k of N e w Y o r k b u y in g r a t e fo r 9 0 d a y b i l l s ................... HATE * *7 -8 *6 -8 SH t4 .3 1 t5 .3 4 4H t5 .4 7 2 .5 2 3 .0 4 4 .2 5 4 .3 6 4 .7 3 4 .8 1 4 6X 5X 4% 7H 5X 3M 5 5 3M 4M 4M P r e v a ilin g r a t e fo r p re c e d in g w e e k t A v e r a g e r a t e of le a d in g b a n k s a t m id d le of m o n t h A v e ra g e M o n th ly R a t e s R e s e r v e D is t r ic t October 1, 1928 Ninety-day loans advanced from 6 % to 7 % per cent and closed the month at 71/4, and funds were scarce at these levels. Open market rates on commercial borrow ing remained moderate, however, and rates on direct loans o f New Y ork City banks to their customers for commercial purposes, which are eligible fo r rediscount at the Reserve Bank, showed only a slight advance in September. F o r several years p rior to 1928, interest rates on 90-day security loans wTere approxim ately the same as rates on prime 4 to 6 months ’ commercial paper, but, as the diagram below indicates, a spread between these rates has developed this year which has no parallel since 1919-1920. In 1919, as in the present year, the rise in rates on security loans relative to commercial paper rates accompanied a rapid expansion o f security loans while the gold reserve underlying the credit structure o f the country was diminishing. The spread between these interest rates in the earlier period was ended by a rise in commercial paper rates, which was caused by conditions that are not present in 1928: commercial bor rowings in 1920 mounted rapidly as the result o f infla fo r 6 0 to 9 0 D a y S t o c k E x c h a n g e T im e M o n e y , 4 to 6 M o n t h s C o m m e r c ia l P a p e r , a n d 9 0 D a y B i l l s , a n d D is c o u n t R a te of th e F e d e ra l R e s e r v e B a n k of N e w Y o r k , 191 9 to 1 9 2 8 . MONTHLY REVIEW, OCTOBER 1, 1923 74 tion o f com modity prices and the accumulation of inventories, and the reserves o f the Federal Reserve System declined practically to the legal minimum. Thus far, in 1928 there has been little evidence of com modity price inflation or accumulation o f inventories, and, although the reserves o f the Federal Reserve System have declined materially, they are still well above m ini mum requirements; so that the Reserve Banks are still in a position to supply reserve funds fo r necessary credit demands. The present high rates on security loans reflect the extraordinary demand fo r funds fo r this purpose and also the effort o f banks generally to correct an over loaned position by diminishing those loans which do not bring them paper eligible fo r rediscount and as to which they do not feel the same obligation as in the case o f loans to their commercial customers. R e n e w ed I ncrease in L oans on S e c u r it ie s Between the middle o f May and the latter part o f August more than half of the large increase in loans on stocks and bonds made by reporting member banks during the spring was liquidated. Tow ard the end of August and during September, however, there has been a renewed demand for loans on securities, accom pany ing renewed activity in the security markets. The total increase in loans to brokers and dealers in securities, placed by the New Y ork City banks for their own ac count, fo r correspondent banks, and fo r others, has amounted to 320 million, carrying these loans close to the highest level of the year. A comparison of brokers loans reported by New Y ork City banks on September 26 with those o f May 16, which was close to the highest point of the year, reveals some interesting changes. Even after some increase in recent weeks, the loans placed by New Y ork City banks fo r their own account are over 450 million smaller than at the middle o f May. Loans placed fo r out-of-town correspondent banks are close to the highest level o f year, and loans placed fo r account o f other customers have been increased by nearly 500 million. A further change is the reduction in time loans. Time loans placed by New Y ork banks fo r their own account have been reduced nearly one-half during the past fou r months, and time loans placed fo r correspondent banks have been reduced nearly 40 per cent. Consequently, the security markets have become increasingly depend ent upon day-to-day loans. F in a n c i n g of A utum n T rad e The beginning o f the seasonal increase in credit re quirements to finance crop m oving and autumn trade has appeared in recent weeks. Loans other than those secured by stocks and bonds have shown little change in this district during the past month, but an unusually high level was maintained during the summer, accom panying a high level of general business activity, and the present volume of loans is substantially above that o f a year ago. The total volume fo r all districts o f these unclassified loans, which include loans fo r agricultural and business purposes, has increased moderately, how ever, and has reached a new high level for the past seven years. The amount o f currency in circulation has also shown a seasonal increase during the past month, but remains smaller than a year ago. Over the Labor Day holiday approximately 100 millon dollars o f additional currency was drawn into circulation, and although a part o f it was retired during the follow ing two weeks, the amount o f currency that remained in circulation on September 19 was nearly 35 m illion larger than a month previous, and about 70 m illion larger than in the third week of July. These seasonal increases in credit and currency, as in previous years, have caused a considerable increase in the demand fo r reserve funds, and this demand as usual has been met by the Reserve Banks. The increase in loans, and resulting deposits, increases the reserve requirements of member banks, and payments o f additional currency into circulation constitute a heavy drain on bank re serves during the last fou r months o f each year. There is, consequently, a substantial increase in the amount of Reserve Bank credit required to keep the reserve bal ances o f member banks at the required level during the autumn months. The average amount of this seasonal increase in Reserve Bank credit, and the manner in which it has been supplied during the past six years is indicated in the follow ing ta b le: (Monthly averages of daily figures; in millions of dollars) Increase over August Average 1922-1927 Total Bills and Securities, after adjustment for changes to offset Gold Movements + 86 +155 +197 +312 Amount supplied through Bills Purchased + 32 + 83 +139 +181 Amount supplied through Discounts and Securities + 54 + 72 + 53 +131 These figures show that the amount of Reserve Bank credit required in September during the past six years has averaged about 86 m illion dollars larger than in August, and that further increases have occurred in each subsequent month to the end o f the y e a r; so that in December the amount o f Reserve Bank credit in use has averaged more than 300 m illion larger than in August, after allowance for changes to offset gold exports and imports. In two years this seasonal increase has ex ceeded 350 million. It will be noted that a considerable part of the additional Reserve Bank credit is normally supplied through purchases of bills (bankers accept ances). These purchases are not made on the initiative o f the Reserve Banks, but the Reserve Banks stand ready to take, at established buying rates, the bills offered by bill dealers and banks. The Reserve Banks in this way purchase the surplus o f bills which the market is unable to absorb. This support, which is some what similar to that given to the London bill market by the Bank o f England, makes possible the mainte nance o f a bill market in this country. E very autumn the volume of acceptances outstanding is increased materially through the creation o f new bills largely to finance the storage o f crops and the export o f cotton and other agricultural products. A s this in crease occurs at the time o f year when the demand on banks for currency and credit is heaviest, it is essential to the existence of a bill market in this country that the Reserve Banks should stand ready to purchase bills when they come into the market more rapidly than new buyers appear, or when banks find it necessary to reduce their holdings o f bills in order to obtain needed reserve FEDERAL RESERVE AGENT AT NEW YORK 75 MILLIONS ofHOLLARS unchanged throughout September, except for the 5 and 6 months maturities, which became established around the middle o f the month at 4 % per cent, as against a previous range o f 4% -5 per cent. Coincident with the advent o f the crop m oving season, the supply of new bills com ing into dealers’ hands increased considerably, and was materially in excess o f the rather moderate in vestment demand. A s a result o f this condition offerings of bills to the Reserve Banks increased, bringing Reserve Bank holdings slightly above last year at this time. Dealers ’ portfolios o f bills which had been com paratively small in A ugust also increased about 50 per cent during September. C o m m e r c ia l P a p e r M a r k e t A c c e p t a n c e H o ld in g s o f F e d e r a l R e s e r v e B a n k s in w it h 1 9 2 6 a n d 1 9 2 7 . 1 9 2 8 C o m p a re d funds. These bill purchases by the Reserve Banks are made at rates established by them, which are adjusted to conform closely with the rates at which bills are sold in the open market. In this way the Reserve Banks each year assist in the financing of autumn crop movements and trade. The amount of bills purchased by the Reserve Banks de pends principally upon the amount of bills created and the condition of the market for them. This year the volume of bills held by the Reserve Banks has increased considerably since the early part o f A ugust in accord ance with the usual seasonal tendency. A s the accom panying diagram shows, this increase has follow ed much the same course as in the past two years, though, with an unsually large amount of bills created and a firm money position, there has latterly been a tendency fo r the Reserve Banks to get larger amounts of bills. The mechanism of bill purchases by the Reserve Sys tem provides a semi-automatic way in which a consider able share o f autumn requirements fo r reserve credit are met without increasing bank indebtedness at the Reserve Banks. T a x P e r io d O p e r a t io n s The volume of transactions conducted by the Reserve Banks for the Government during the September 15 tax period was unusually large, due to the fact that the re mainder of Third Liberty Loan bonds still outstanding, amounting to over 950 million dollars, were called fo r redemption on that date. The redemption of these bonds as they were presented fo r payment, the sale o f a new issue of approximately 550 m illion of Treasury certifi cates, interest payments, the collection of third quarter income taxes, and the withdrawal o f funds from deposi tary banks, contributed to a volume of transactions total ing well over two billion dollars. Notwithstanding the very large movements of funds involved in these transac tions, the money market was not greatly affected— there was a brief period of ease around the 15th of the month, which was follow ed by a period of rather scant supply around the 19th. B il l M a r k e t Follow ing the general reduction on A ugust 31 o f Ys per cent on all maturities of bills, the rate level remained Commercial paper rates remained fairly steady during September, and the prevailing rate of 5 % per cent for prime names towards the end o f the month was quotably the same as at the end of August. A slightly higher tendency was indicated, however, by the appearance in the market o f a considerable number o f offerings at 5 % per cent, and the virtual elimination of sales at 5% per cent, except of a few especially high grade names. D u r ing the first week o f the month, the investment demand fo r paper on the part o f the interior banks tem porarily became more active, but subsequently declined. On the supply side, there was little indication o f any increase in the amount o f commercial borrow ing being handled through the open market. A t the end of August, 24 dealers had outstanding $458,000,000 of paper, an amount 5 per cent smaller than a month earlier, and 22Y2 per cent below the outstandings o f August a year ago. R e t ir e m e n t o f t h e T h i r d L i b e r t y L o a n W hen the Third Liberty Loan was originally issued in May 1918, $4,176,000,000 o f these bonds were sold throughout the country. In the period between 1918 and the end of 1927, $2,028,000,000, or nearly one-half o f these bonds were retired by the Treasury, chiefly through the operation o f the cumulative sinking fund, purchases from surplus money in the Treasury, pur chases with the proceeds o f cash debt payments by foreign governments, and retirement of bonds received as payments from foreign governments. A s a result, only $2,148,000,000 of the Third Liberty Loan bonds remained at the beginning o f 1928 to be retired by the date o f maturity, September 15. The first step toward the refunding o f this remaining half o f the issue was an exchange offering on January 16 o f a new issue o f 3 % per cent Treasury notes matur ing in 1932, but callable in 1930; more than one-fourth of the Liberty bonds then outstanding were exchanged fo r these notes. In July an additional $108,000,000 were exchanged fo r 3 % per cent Treasury bonds o f 1940-43, and, on the maturity date September 15 $103,000,000 were exchanged fo r 4 Y2 Per cent Treasury certificates of indebtedness due on June 15, 1929. Throughout the entire period, the Treasury also pur chased Third Liberty bonds fo r the sinking fund, and with surplus and other monies. A s a consequence of operations preceding maturity, when September 15, arrived, the Treasury had to provide fo r the redemption o f only about $955,000,000, or considerably less than 76 MONTHLY REVIEW, OCTOBER 1, 1928 one-half of the amount outstanding at the beginning of the year, and less than one-fourth of the original issue. On the first day of redemption, September 15, nearly 50 per cent o f these remaining bonds were redeemed, whereas on November 15, 1927, the day the Second Liberty Loan was called for retirement, a little over 40 per cent of the outstanding bonds o f that issue were redeemed. Subsequent redemptions of T h ird ’s fell off more rapidly than did redemptions o f Second’s during the corresponding p eriod ; so that, at the end o f the first thirteen calendar days of the redemption period, approxim ately 80 per cent of the bonds had been re deemed, or practically the same proportion as in the case of the S econd’s. This left at the close o f business September 27 a little over $196,000,000 of T h ird ’s still to be redeemed. W hile the larger part of the remaining bonds will no doubt be presented within the next few months, a considerable number will probably remain outstanding fo r some time, despite the statements widely circulated by -the Treasury that interest on the bonds ceased on September 15. A t the end of A ugust this year, 9 % months after the Second Liberty Loan bonds were called for redemption, there were still $25,000,000 of that issue outstanding. The principal operations leading to the retirement o f the Third Liberty Loan are summarized b elo w : Originally issued May 9, 1918................................. Retired prior to December 31, 1927......................... $4,175,650,050 2,027,996,900 Balance outstanding ..................................... Exchanged during January 1928 for 3 ^ per cent Treasury Notes, Series C 1930-32....................... $2,147,653,150 Balance outstanding....................................... Exchanged during July for 3% per cent Treasury Bonds of 1940-43...................................................... $1,540,253,500 Balance outstanding....................................... Purchased by Treasury for sinking fund, and from surplus money in Treasury, January 1 to Sep tember 14, 1928.......................................................... $1,432,731,950 Balance outstanding September 14............... Exchanged on and after September 15 for 4% per cent Treasury Certificates of Indebtedness, Series TJ 1929.......................................................... Redeemed September 15 to 27 from sinking fund Redeemed September 15 to 27 from tax receipts.. $ 955,387,850 Balance outstanding on September 27 (on which interest has ceased)......................... 607,399,650 107,521,550 477,344,100 102,821,300 202,975,000 453,415,200 In September the net result of exports, imports, and earmarkings shows a small loss o f gold to this country, amounting, according to a prelim inary calculation, to $1,500,000. The only im portant movement resulting directly from the position o f the exchanges was the importation o f $2,434,000 o f gold from E ngland on the 21st. A shipment o f $2,000,000 was made to Italy towards the end o f the month. There were other m inor imports chiefly from Latin Am erica and exports to Mexico, and to the British and Dutch colonies in the F ar East. The amount of gold held here under earmark showed a net increase o f $1,200,000. Elsewhere, interest in gold movements centered chiefly upon London and Berlin. Germany is reported to have taken approxim ately $20,000,000 in gold from London and to have received gold from Russia and Denmark. Thus, in the fou r weeks ended September 22, the Reichsbank has been able to increase its gold holdings by roughly $22,500,000. F o r e ig n E x c h a n g e The outstanding feature o f the foreign exchange mar ket during September was the recession o f sterling to a position below the gold im port point. W ith sterling quoted under $4.85 fo r the first time since February 1927, the market has been expecting a movement o f gold from London to this country, but the only shipment thus far received is that o f about $2,400,000 noted above. The range of sterling during the month has been be tween $4.851/4 and $4.84 15/16, and the decline was fairly steady from the first o f the month until the third week, after which there was a slight recovery. The seasonal curve in the accom panying chart shows that a decline at this time of year is norm ally to be expected, but the 1928 curve shows that the decline since May has been more than usually rapid. The curve which shows the amount the London rate on three months bills is above or below the New Y ork time money rate indicates the abnormal factor in the situation. The sterling curve shows effective resistance to the attraction of higher rates here until about June 1, when there was a sharp break. STERLINGEXCHANGE Dollars. riCNF¥ VKTE DIFFERENTIAL TferCent. $ 196,176,350 W ith the redemption of these bonds, three o f the great war loans have been retired— the V ictory Loan issued in 1919, the Second issued in 1917, and the Third issued in 1918. Part o f this retirement has been ac complished by the application o f revenue, both from internal sources and from foreign debt payments, and the rest has been consummated through refunding operations. To the extent that these Liberty bonds and other obligations have been redeemed out o f income, there has been a reduction in the National debt. The estimated gross debt at the end o f September is about $17,400,000,000, an amount more than one billion dollars, or 6 per cent, smaller than a year ago. The total reduction in the National debt since the high point was reached in 1919 has now amounted to over nine billion dollars or a little more than one-third. G o ld M o v e m e n t S t e r lin g E x c h a n g e in 1 9 2 8 , C o m p a re d w it h A m o u n t L o n d o n B i l l R a t e H a s B e e n A b o v e o r B e lo w T im e M o n e y R a t e in N e w Y o r k ; a ls o C o m p a re d w it h A v e r a g e S e a s o n a l M o v e m e n t, 1 8 8 9 to 1 9 1 9 . FEDERAL RESERVE AGENT AT NEW YORK The resistance or steadiness which usually appears when an exchange approaches closely the gold point, was ap parent last month but a fresh weakening tendency is shown in September due to continued firming o f money here, combined with pressure of seasonal demand fo r dollars. The French franc has been maintained at a fairly con stant level between 3.90% and 3.91 1/16, just above the out-going gold point to New Y ork. The strength o f the German reichsmark, which is quoted at a premium over the dollar, is noteworthy in contrast with the decline which took place in other European exchanges, and may perhaps be explained by German borrow ing abroad and high money rates in Germany. F airly wide fluctua tion was observable in the Spanish, Argentine, Japanese, and Shanghai exchanges, the Argentine peso remaining below the gold im port point throughout the month. The Canadian dollar, which is normally quoted at a premium at this time of year, when grain exports from Canada must be paid for, was quoted at par during the second half of the month. H igh money rates here may have tended to offset somewhat the usual demand fo r Canadian exchange at this season. 77 pare favorably with that o f a year ago. The increase has occurred especially in domestic public utility offerings and in foreign securities. In August the total volume o f security issues reported by the Commercial and Financial Chronicle amounted to only 267 million dollars, com pared with 617 million a year ago, but an analysis o f the figures indicates that the greater part of the decline was due to the stoppage of refunding operations and the almost complete absence of foreign financing. R efunding operations to reduce inter est charges were in unusually large volume in August 1927, but have been made impracticable in recent months by the rise in interest rates. The volume o f new domestic corporate securities offered during August, although smaller than last year, was larger than in August o f 1924 and 1926, and was close to the volume o f A ugust 1925. The total o f new security offerings during the first eight months o f the year was about 5 per cent smaller than in the corresponding period last year, but was con siderably larger than in any o f the three preceding years. 5,06/ S e c u r it y M a r k e t s Despite heavy trading on the New Y ork Stock E x change, ranging on most fu ll days between 4,000,000 and 4,800,000 shares, the general body o f stocks had rela tively little net advance during the month of September. Price movements were irregular, and, while a number of the more active stocks reached new high levels, a con siderable number showed at least small net losses for the month. Representative averages of industrial stocks rose a few points further to new high levels, and near the end o f the month were from 7 to 20 points above their previous high levels of May and June. Averages including a large number o f stocks made comparatively small advances. Public utility stocks also advanced somewhat during the month, but remained close to their previous high levels of May. Railroad stocks continued inactive; price averages declined slightly during the month and remained from 6 to 10 points below the high quotations o f May. The general trend of corporation bond prices was upward in September. The decline in corporation bond prices, which began last A pril, continued until the middle of August, at which point average prices showed a loss o f 3 % points from the high levels of the first quarter of the y ea r; since that time, prices have recov ered about 1 point. W hile all important classes of corpo rate issues shared in the advance, railroad bonds showed the largest net gain. Foreign bond prices also advanced slightly, and towards the end o f September were fra c tionally above their m id-August low levels. The United States Government long-term list, however, moved gen erally low er; Treasury bonds declined on the average more than y2 point and the First Liberty 3 % ’s declined over a point during the month. N e w F in a n c in g A marked revival of new security issues has occurred in September follow ing the small volume o f August, and it now appears likely that the September total w ill com r t a s r e m r m t 19 24 19 2 5 19 2 6 19 2 7 19 2 8 N e w C a p it a l I s s u e s o f D o m e s t ic C o r p o r a t io n s D u r in g F i r s t E i g h t M o n t h s o f E a c h Y e a r , 1 9 2 4 to 1 9 2 8 ( in m illio n s o f d o ll a r s ) . A s the accom panying diagram indicates, the substantial decline in the volume o f long-term bond issues fo r domes tic corporations has been largely offset by an exception ally large volume o f stock issues. M any of these stock is sues have been offered directly to stockholders and there fore have not been included in the records of public offer ings. A s a result, the total amount o f new capital obtained by domestic corporations during this period has • been larger than in any recent year except 1927. Notwithstanding the virtual cessation o f foreign financing during August, the total o f foreign issues dur ing the first eight months o f the year was larger than in the corresponding period o f any of the past fou r years. Domestic m unicipal security offerings, however, have been in smaller volume than in most o f the recent years. F o r e ig n T r a d e E xports o f merchandise during August were valued at $381,000,000. This indicates an increase over July of considerably less than the usual seasonal proportions, and an increase over a year ago that would hardly cover the increase in wholesale com modity prices during the year. Imports, on the other hand, valued at $347,000,000, showed far more than the usual seasonal increase over July, but were $22,000,000, or nearly 6 per cent, smaller than a year ago. 78 MONTHLY REVIEW, OCTOBER 1, 1928 Shipments abroad of manufactured products, although slightly less than in July, continued to be large and were valued at $27,000,000 more than in August o f last year. E xports of crude foodstuffs were valued at $18,000,000 less than a year ago, although there was an increase over July, due partly to the seasonal influence o f grain ex ports. The volume o f raw silk imported during August was the largest ever recorded. Rubber imports, however, were smaller than in the previous month, or in A ugust 1927, and the value showed a considerably larger decline com pared with last year, due to lower prices. Building Construction contracts awarded in the New Y ork and Northern New Jersey district during August were 10 per cent smaller than a year ago, follow ing a decrease of 12 per cent in July, according to reports received by the F . W . Dodge Corporation. The August total fo r the 37 states east of the Rockies showed a decline o f 6 per cent from that of a year ago, the first decrease from last y e a r’s volume since March. Since the very heavy vol ume o f May, the trend of building contracts has been downward, due in part to seasonal tendencies, but the decline o f the past three months has been more rapid than is usual. In fact, there is frequently an increase from July to August, whereas this year a decline of 11 per cent occurred. The decline does not appear to have continued in September, however; fo r the first three weeks of the month, the daily average o f contracts awarded was about 15 per cent larger than in the same period of 1927. The August decline from last y e a r’s level was prim arily due to a decline in commercial building, and also to some reduction in educational projects. Residential building continued heavier than last year, though the increase was much smaller than in other recent months. Contracts for the other principal classes of construction— industrial building and public works and utilities— showed little change from the volume of a year ago. P r o d u c tio n Production in leading industries in general showed a substantial increase in August. A number o f important lines, such as pig iron, bituminous coal, coke, lumber, and copper, showed little change after seasonal allow ance, but none of the large industries curtailed opera tions materially, and several showed substantial in creases. One of the most important increases was in the automobile indu stry; production of passenger automo biles fo r the first time in the history of the industry exceeded 400,000 cars, and the output of trucks also reached a new high level. Production of steel ingots in creased substantially, and established a new high record fo r the month of August. Some improvement was re ported in the textile industries; cotton consumption, though still considerably below last year, showed a sub stantial increase over July, and operations in the woolen and silk industries also showed increases after seasonal allowance. From weekly trade reports, it appears that industrial activity continued at a high level during September. Em ploym ent at the D etroit automobile center fo r seven consecutive weeks established new high levels; there was a small decline in the week o f September 25, but em ploym ent was about 50 per cent above the level of a year ago. Lum ber orders reached the largest volume of the year, and production continued in substantial vol ume. Steel mill operations also were reported at a high level. Production o f anthracite coal was slightly below the level o f August, but the output o f both bituminous coal and o f petroleum was larger than in August. (Computed trend of past years=»100 per cent; adjusted for seasonal variations) 1927 1928 Aug. June July Aug. 99 96 115 89 105 119 82 97 102 96 105 101 112 111 136 104 103 107 104 88 83 109 106 78 103 93 103 90 97 104 113 130 105r 98 106 105 80 78 110 106 79 99 92 108 92 97 83 123 132 100 99 105 114 94 81p 117 107p 79 100 92 109 99 104 114 119 134 111 108 106 90 101 87 96 98 100 98 104 108 121 102 109 74 99 94 112 76 97 95 74 95 72 92 101 109 106r 120 129 85 86 87 103 73 103 87 83 101 62 86 112 105 114 126 134 129r 90 91 108 80 Producers’ Goods Pig iron Steel ingots................................................................ Cotton consumption................................................. Woolen mill activity*............................................... Silk consumption*..................................................... Petroleum.................................................................. Bituminous coal........................................................ Coke........................................................................... Lumber...................................................................... Copper, U. S. mines................................................. Lead........................................................................... Zinc .......................................................................... Tin deliveries............................................................ Leather, sole.............................................................. Cement...................................................................... Paper, total............................................................... Wood pulp................................................................. Consumers* Goods Hogs slaughtered...................................................... Cattle slaughtered.................................................... Sheep slaughtered..................................................... Calves slaughtered.................................................... Farm produce shipped............................................. Wheat flour............................................................... Sugar meltings, U. S. ports..................................... Gasoline..................................................................... Anthracite coal.......................................................... Paper, newsprint....................................................... Printing activity....................................................... Tobacco products..................................................... Boots and shoes........................................................ Tires........................................................................... Automobile, passenger............................................. Automobile, truck.................................................... * Seasonal variation not allowed for p Preliminary 95 95 90 88 ii6 118p 126p 155 124 r Revised Employment and Wages Factory employment, both in New Y ork State and in the country as a whole, increased more than usual in August, but remained somewhat below the level o f a year ago. This bank’s index, in which allowance is made fo r the usual seasonal variations, advanced further to the highest level since last September. A s compared with a year ago, the largest gains were shown in the automobile, agricultural implement, and machine tool industries, while the largest declines were in shipbuild ing and cotton goods. Out-of-door activities, as well as manufacturing, increased during the month, and fu r nished additional employment fo r large numbers o f workers. W age earnings also have increased during recent months. In every month since May, average weekly earnings o f factory workers in New Y ork State have reached new high levels fo r those months, but because o f the lower level of employment total factory payrolls remain somewhat smaller than a year ago. I n d e x e s o f B u s in e s s A c t i v i t y This bank’s indexes o f business activity showed no consistent change from July to August. Carloadings o f merchandise and miscellaneous freight declined slightly, after seasonal allowance, while loadings of bulk freight, 79 FEDERAL RESERVE AGENT AT NEW YORK which have been com paratively small, increased some what. The various other indexes of business and finan cial activity also showed mixed changes, but, in general, indicated a fairly high level o f general business activity. (Computed trend of past yeara=100 per cent; adjusted for seasonal variations) 1928 1927 Aug. June July Aug. 103 97 105 123 97 105 101 91 101 99 80 93 103 91 108 104 83 97 102 93 lOlp 107p ioi 108 106 101 121 113 103 103 104 102 123 111 95 97 103 99 132 104 94 99 103 96 137 107 97 Bank debits, outside of N. Y. City. ...................... 104 Bank debits New York City.................................. 142 Velocity of bank deposits, outside of N. Y. City.. 104 Velocity of bank deposits, New York City............ 145 Shares sold on N. Y. Stock Exchange.................... 230 98 Postal receipts.......................................................... Electric power........................................................... 105 Employment in the United States......................... 100 Business failures....................................................... 107 Building contracts, 36 States.................................. 126 New corporations formed in N. Y. State . . . . . . . . 113 98 Real estate transfers................................................ 114 167 119 177 239 89 106 97 121 138 127 88 104 142 114 154 186 87 107 97 101 126 120 86 104 149 113 166 293 90 171 221 169 176 223 170 176 222 172 176 223 172 Primary Distribution Imports...................................................................... Panama Canal traffic............................................... Wholesale trade........................................................ Distribution to Consumer Department store sales, 2nd District..................... Chain grocery sales.................................................. Other chain store sales........................... ................ Mail order sales........................................................ Life insurance paid for............................................. Advertising................................................................ General Business Activity General price level.................................................... Composite index of wages....................................... Cost of living............................................................ W h o le s a le T r a d e A ugust sales of wholesale dealers in this district, reported to this bank, showed substantial seasonal in creases in a m ajority of lines, but com pared with a year ago indicated mixed conditions. Hardware sales showed a substantial gain over last year, follow ing decreases in the two months preceding, and machine tools continued fa r above the level of a year ago. There were smaller increases also in sales of drugs and paper, but decreases o f varying amount were reported in most other lines. In some cases, notably shoes and stationery, these decreases followed increases in July. Commodity Net Sales Groceries....................... Men’s clothing............. Women’s dresses. . . . . . Women’s coats and suits Cotton goods—Jobbers Cotton goods — Com mission ...................... Silk goods..................... Shoes............................. Drugs............................ Hardware..................... Machine tools**........... Stationery..................... Paper............................. Diamonds..................... Jewelry......................... + 0.4 +117.8 +75.9 +111.8 +35.0 Stock end of month + 1.0 + 4.8 + 6.7 +28.2 + 'i'.9* +37.0 — 10.4 +15.0 +11.9 +20.6 — 4.1 +18.2 — 4.7 + 4.9 +24.9 +38.4 } - T . 7 Weighted Average... +46.7 Percentage Change August 1928 compared with August 1927 Net Sales — 1.3 — 10.2 — 11.2 — 8.8 — 9.1 — 12.8 —20.6 — 7.7 + 3.2 + 8.6 +41.4 — 9.7 + 2.5 + 0.6 — 14.8 — 4.7 Stock end of month — 3.9 Per cent of Accounts Outstanding July 31 Collected in August 1927 1928 75.0 37.6 73.1 36.6 } + 2.1 48'.4 35.0 46.8 52.3 45.9 31.8 52.4 51.6 7i .4 63.8 } 25.0 75‘.2 60.6 } 23.4 49.5 * Quantity not value. Reported by Silk Association of America. ** Reported by the National Machine Tool Builders’ Association. Locality 48.4 Percentage Change August 1928 compared with August 1927 Net Sales Stock on hand end of month Per cent of Accounts Outstanding July 31, Collected in August 1927 1928 1.1 1.1 2.1 1.9 2.4 5.2 3.9 43.1 49.3 33.8 42.5 49.5 33.6 — 7.1 — 3.5 +21.1 New York...................................................... Buffalo........................................................... Rochester....................................................... Svracuse......................................................... Newark........................................................... Bridgeport..................................................... Elsewhere....................................................... Northern New York State....................... Central New York State.......................... Southern New York State........................ Hudson River Valley District................. Capital District......................................... Westchester District................................. — 9.1 — 12.0 — 10.6 — 8.9 + 3.4 + 0.4 — 4.4 — 2.2 — 9.2 — 2.1 — 7.8 — 2.8 — 2.8 + — + — + — — All department stores................................... Apparel stores............................................... Mail order houses......................................... 4i .7 39’.6 34.4 35.Q + 0.7 42.0 41.3 + 5.5 41.3 39.5 A s the follow ing table indicates, sales o f shoes were considerably larger than a year ago, and sales of m en’s furnishings were slightly larger. Most o f the apparel departments, however, showed substantial declines com pared with last year, as did also the furniture and home furnishings, yard goods, and other principal depart ments. Net Sales Stock on Hand Percentage Change Percentage Change August 1928 August 31, 1928 compared with compared with August 1927 August 31, 1927 Toys and sporting goods............................. Men’s furnishings........................................ Books and stationery.................................. Toilet articles and drugs............................. + 0.5 +30 ‘.2* — 25.0 +12.5 + 3.7 A ugust sales o f leading department stores in this dis trict were 7 per cent smaller than a year ago. In A ugust 1927 sales were unusually large, however, whereas in A ugust this year, weather conditions were unfavorable to the sale o f fall apparel and other m er chandise. A ll o f the reporting stores in New Y ork City, and most o f the stores in leading cities up-State, had a smaller volume o f business than in A ugust o f last year. The large apparel stores also reported smaller sales than a year previous fo r the first time since last October. The leading mail order houses, however, continued to report very substantial increases over the sales of a year ago. Stocks o f merchandise on hand at the end o f the month remained only slightly larger than a year previous. Col lections were slightly smaller, relative to the amount of accounts outstanding, than in August 1927. 99 115 110 108 p Preliminary Percentage Change August 1928 compared with July 1928 D e p a rtm e n t S tore T r a d e Silverware and jewelry............................... Women’s ready-to-wear accessories........... Luggage and other leather goods............... Home furnishings........................................ Women’s and Misses’ ready-to-wear......... Linens and handkerchiefs........................... Men’s and Boys’ wear................................. Silks and velvets.......................................... Musical instruments and radio.................. Woolen goods............................................... Miscellaneous............................................... +14.2 + 2.5 + 1.4 + 0.6 — 1.4 — 1.6 — 4.1 — 4.2 — 6.3 — 6.3 — 9.6 — 10.6 — 12.8 — 12.9 — 13.5 — 17.4 — 25.9 — 43.8 — 11.7 +15.5 +12.6 — 3.0 +13.3 + 5.5 + 7.1 — 4.4 + 4.1 — 10.6 + 9.2 + 2.8 — 0.5 + 4.0 + 7.9 +17.9 +10.6 —22.7 + 4.2 + 0.4 MONTHLY REVIEW, OCTOBER 1, 1928 80 PERCENT Business C onditions in the United States (Summarized by the Federal Reserve Board) 70LUME of industrial and trade activity increased in August, and there was a further advance in wholesale commodity prices. Reserve Bank credit outstanding increased in September reflecting in part seasonal demands for currency and credit. Money rates remained firm. \ P r o d u c t io n In d e x N u m b e r s o f P r o d u c t io n o f M a n u f a c t u r e s a n d M in e r a ls , A d ju s t e d fo r S e a s o n a l V a r i a t io n s ( 1 9 2 3 - 2 5 a v e r a g e = 1 0 0 p e r c e n t ) . PER CENT Production of both manufactures and minerals increased considerably in August, the output of manufacturing plants being larger than at this season of any earlier year. Automobile production was in record rolume in August, and available information indicates that output was maintained by many pro ducers at a high level during September. Iron and steel production continued large in August and September, and output of nonferrous metals increased between July and August. Textile mill activity, which had been somewhat reduced in recent months, also showed a substantial increase. Factory em ployment and payrolls have increased since midsummer and in August were close to the levels of a year ago. In the building industry there was evidence of recession in a sharp decline after the early summer in contracts awarded, which were in smaller volume during August than in the corresponding month of any year since 1924. In the first three weeks of September, however, awards were somewhat larger than last year. Estimates of the Department of Agriculture for September 1 indicate that yields of principal crops will be larger than last year and above the average for the preceding five years. T F e d e r a l R e s e r v e B o a r d 's In d e x e s o f B u ild in g C o n tra c ts A w a rd e d B a se d on R e p o rts of th e F . W . D o d g e C o r p o r a t io n ( 1 9 2 3 - 2 5 a v e ra g e 100 p e r c e n t). -PERCENT r a d e Distribution of commodities showed seasonal increases in August, although sales in most lines of wholesale and retail trade did not equal the unusually large sales of August 1927. Department stores stocks increased as is usual in August but continued smaller than a year ago, while inventories in several lines of wholesale trade were somewhat larger than last year. Freight-car loadings were in about the same volume in August as a year earlier. Ship ments of miscellaneous commodities and grains were larger and those of coal, livestock, and forest products smaller than last year. P r ic e s C o m m o d it i e s ( 1 9 2 6 a v e r a g e = 100 p e r c e n t ). The general level of commodity prices increased in August and the Bureau of Labor Statistics index, at 98.9 per cent of the 1926 average, was the highest in nearly two years. Increases in August were chiefly in the prices of livestock and livestock products, which are now higher than at any time since 1920. There were also small increases in fuels, metals, and build ing materials. Grains and cotton showed sharp declines, and there were de creases also in hides and skins and wool. Since the first of September there have been some declines in livestock and meats, and a sharp further decrease in cotton, while prices of pig iron, copper, and petroleum have advanced. HILLJONS(/DOLLARS B a n k C r e d it Between the middle of August and the middle of September there was a considerable increase in the loans and investments of member banks in leading cities. Part of the increase was in loans on securities and part reflected a seasonal increase in other loans. Deposits of the member banks also increased during the period. Volume of Reserve Bank credit outstanding increased during the four weeks ended September 19 in response to seasonal demands for currency and growth in member bank reserve requirements. The increase in total bills and securities was largely in holdings of acceptances and in discounts for member banks. R e s e r v e B a n k C r e d it : M o n th ly A v e ra g e s o f D a ily F ig u r e s fo r 12 F e d e r a l R e s e r v e B a n k s ( L a t e s t f ig u r e s a r e a v e r a g e s o f f ir s t 22 d a y s of S e p te m b e r). During the same period there were further increases in open-market rates on collateral loans and on commercial paper, while rates on bankers accept ances were reduced from 4% per cent to 4% per cent.
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