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MONTHLY REVIEW o f C r e d it a n d B u s in e s s C o n d it io n s S e c o n d Federal Eeserve Agent F e d e r a l R e s e r v e Federal Eeserve Bank, New York Money Market in September Reports from member banks in principal cities during the past month have given further indication o f a ter mination o f the rapid decline in bank credit. D uring the fou r weeks ended September 21 there was a net in crease of $431,000,000 in the total loans and investments o f all weekly reporting banks, due to a heavy participa tion in the new Government securities issued on Sep tember 15. Most of this increase occurred in New Y ork City, where the principal banks have been well supplied with reserves fo r several months. The net increase in the loans and investments o f New Y ork member banks in the fou r weeks ended September 21 was $323,000,000, bringing the total increase since July 20 to $511,000,000. R eporting member banks in other cities throughout the country also showed some net increase in their total loans and investments in the fou r weeks ended September 21, whereas in the preceding month there was practically no change, and in every previous month fo r more than a year there had been net declines. The moderate upturn in member bank credit during the past two months follow ed recoveries in commodity and security prices from the low levels reached early in the D is t r ic t October 1,1932 summer, but in general has not been in types of credit that are directly related to the com m odity and security markets. Loans to brokers and dealers in securities, placed by New Y ork City member banks fo r their own account and fo r out-of-town banks, have increased ap proxim ately $80,000,000 during the past two months, but there have been more than offsetting declines in other security loans o f the reporting member banks, and the total security loans o f these banks declined to the lowest level since the summer o f 1924. A ll other loans o f the reporting banks, which consist largely o f commercial loans, have also been reduced further in recent weeks and on September 2 1 were well under the lowest point reached in 1922, as the accom panying diagram indicates. This is true both in New Y ork City and elsewhere. Under the existing conditions o f severely reduced business ac tivity and difficulty in making profits, the amount of commercial loans currently required by business con cerns or justified by their position is considerably re duced. In view o f this reduction in other form s o f credit and the large requirements o f the Government, which is now financing indirectly many transactions which under more Loans and In ve stm en ts o f W e e k ly R eporting M em ber B anks in Principal Cities (M o n th ly averages o f w eekly figu res) 74 MONTHLY REVIEW, OCTOBER 1, 1932 normal conditions would be done directly through com mercial and investment banking channels, an increasing proportion o f bank funds necessarily is employed in Gov ernment securities. Consequently, while bank loans have continued to decline, investments in Government securi ties have increased rapidly, and practically all o f the recent increase in member bank credit has been in that form. On September 21 the Government security hold ings of the reporting banks showed an increase of $490,000,000 over a month previous, and constituted a larger proportion of total loans and investments than at any time since early in 1919. Most of the increase has been in securities of relatively short maturity. The recent increase in bank credit followed a further strengthening of the position of member banks, which was reflected in continued reduction in their indebted ness at the Eeserve Banks and at correspondent banks and a further increase in their reserves. There was also a marked decrease in the amount of funds the Recon struction Finance Corporation was called upon to ad vance to banks. These changes were the result of the same causes as in the preceding month— a continued gain o f gold by this country, a further return flow of hoarded currency to the banks, and additional issues of National bank notes. D uring September the increase in the mone tary gold stock of the United States amounted to approxi mately $ 1 0 2 ,000 ,000 , bringing the total gain since the middle of June to around $280,000,000, and the amount of currency in circulation showed a net reduction of $86,000,000 between August 31 and September 28, con trary to the usual seasonal movement. The volume of National bank notes issued under the recent amendment of the banking laws was increased about $50,000,000 further during September, and a large volume of cur rency o f other types was retired. A considerable part of the funds obtained by member banks directly or indi rectly from these sources was used fo r the repayment of indebtedness, and the total loans of Federal Reserve Banks to member banks were reduced $93,000,000 further during September to a new low point fo r the past year. Member bank reserve balances increased about $ 1 2 0 ,000,000 further, and in the latter part of the month were between 350 and 400 million dollars above minimum requirements, although they remained about $150,000,000 below the level maintained during most of the year 1931 up to the period of the heavy gold outflow. M o n ey R ates Open market money rates showed little change during September. The principal exception was the yield on short term Government securities. Reflecting the value placed on the tax exemption feature and on expected exchange privileges, the Government securities that mature within six months sold near the end of the month at premiums that more than eliminated all net income. The average rate charged by leading New Y ork City banks on prime commercial loans to customers and Stock Exchange time money rates also were reduced slightly in September, Money Rates at New York Sept. 30, 1931 Aug. 31, 1932 Sept. 30, 1932 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial p a p er.......................... Bills— 90 day unindorsed......................... Customers’ rates on commercial loans.. Treasury securities Maturing December 15 (yield).......... Maturing March 15 (yield)................. Federal Reserve Bank of New Y ork re discount ra te ........................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills * Nominal S 1H 2^ 2 lX t3 .3 3 2 2 1 * 1 X -1 X 2 -2 X X f 4 .13 .85 1.17 .09 .26 IX 2 ix 2 -2 X X f3 .9 8 No yield N o yield ^ 2X 1 1 t Average rate of leading banks at middle of month eptem ber T reasu ry F in a n c in g O p e r a t io n s September 15 issues of United States Treasury securi ties took the form of $834,000,000 o f S1/^ per cent 5 year notes and $451,000,000 of 1*4 Per cent certificates o f in debtedness. The new issues were largely oversubscribed and were shortly quoted at premiums amounting to point in the case o f the 1 year issue and % point in the 5 year notes. These premiums subsequently were in creased further accom panying strength in all Govern ment securities. On September 15 a total o f $713,000,000 of Treasury certificates matured and o f these $604,000,000 were ex changed fo r the new issues, leaving only $109,000,000 o f certificates to be redeemed in cash. Furthermore, cash subscriptions to securities of the new issues were un usually large, so that the Treasury, instead o f having a substantial excess o f disbursements over receipts, as fre quently happens on the quarterly tax dates, actually had larger credit balances at the Reserve Banks on Sep tember 15 than on the previous day. Subsequently, in come tax collections provided fo r Treasury disburse ments, including requirements of the Reconstruction Finance Corporation, so that no withdrawals o f Govern ment funds from depositary banks were made between September 7 and the end o f the month. The only other Government financing during Sep tember was the sale o f $100,000,000 o f 91 day Treasury bills dated September 28, which replaced a m aturity of like amount. This issue was sold at an average discount equivalent on an annual basis to .23 of one per cent, which is a lower yield than on any previous issue of Treasury bills. B il l M arket Reflecting the large excess reserves in the possession o f member banks, the discount market was exceedingly quiet during September. Few bills were offered in the market by discounting and accepting institutions, and whatever bills did come into dealers’ lists were immedi ately absorbed by purchasing banks. As a result, port folios o f the dealers remained at the low level reached in A ugust and quotations fo r bills were unchanged at the rates established in the latter part of June. Federal Reserve Bank holdings of bills for their own account remained very small, and the amount of bills 75 FEDERAL RESERVE AGENT AT NEW YORK next week, however, reactionary tendencies developed, as a result of which about 40 per cent of the rise from the y e a r’s low point was canceled. This level of stock prices prevailed fo r only a few days, and was follow ed by a strong recovery, but in the closing week the market again turned irregularly lower. A s the accom panying diagram indicates, stock prices near the end o f September were moderately below the peak reached early in the month, but all classes, including the rails, utilities, and indus trials, were near their end o f A ugust quotations. MILLIONS OF DOLLARS Trading on the whole remained nearly as active in September as in August. Turnover on the New Y ork Stock Exchange showed a daily average o f about 3,200,000 shares, which compares with less than 1,000,000 shares fo r some months prior to August. o m m e r c ia l P aper M arket V irtually no change occurred during September in the open market for commercial paper. The prevailing rate for 4 to 6 month prime paper held to the 2 -2 ^ per cent level established early in August, and choice paper of maturity not exceeding 3 months continued to be sold at 1 % per cent, especially in the New England market. On the whole, the investment demand fo r prime paper coming from the banks was again reported to have been in excess o f the supply which the dealers were able to offer because of the limited amount of new paper that was created by the type of industrial and commercial concern eligible to use the open market. E nd of August outstandings o f commercial paper, at $108,000,000, were 8 per cent larger than those of a month earlier, according to reports from dealers com piled by this bank. In the two preceding years a decline occurred between July and August. Outstandings con tinued to be less than 40 per cent as large as a year ago. Notwithstanding the irregularity shown by sections of the domestic corporation list there were sustained ad vances in foreign bonds and in the United States Govern ment bond list. Foreign issues, according to the BakerK ellogg price average, rose about 2 % points further to the highest level since November 1931. Liberty Loan PRICE INDEX - C "S \ held for foreign correspondents continued to decline. It appears that the proportion of the total volume o f out standing bills owned by the accepting institutions was increased even further during September. A t the end of August, these accepting institutions that report their outstandings to the Am erican Acceptance Council held $574,000,000 o f bills, or nearly 85 per cent of all the bills outstanding, which then amounted to $682,000,000. The outstanding volume of bills has reached the lowest level since September 1926 as the result of a practically continuous decline during 1931 and 1932, which is shown in the accom panying diagram. Domestic corporation bond prices moved irregularly during September, follow ing the large advances that occurred in the three preceding months. H igh grade issues held firm throughout the period, while in the lower grade bonds prices tended to move with stock prices, a sizable decline in such issues during the second week of the month being follow ed by a considerable recovery. Currently available price averages o f domestic corpora tion bonds were not materially different toward the close o f September than at the close o f August, although on the whole they showed declines o f 1 to 3 points in com parison with the peak reached during the third week of August. The highest grade industrial and public utility bonds, however, were selling toward the close o f Septem ber at the best prices o f the year, and the best quality railroad bonds were only slightly below their highs for the year. \PUBLIC UTILITY t .J V \ \ INDUSTRIAL \ - \ / \ \ '\ \ r \ A / .... J / Security Markets The July-A ugust advance in the stock market was con tinued through the first few trading days of September, and at the level then reached the general average o f prices was close to the highest of the year, and was more than double the lowest quotations o f 1932. In the \ a RAILRC>AD \ i i t i i 1 .1 ..L i i j _____ ______ .. . i_____ ... i_____ ______I . . - I , . . . . , . ! _____ i_____ I____________I------L - 1931 t ( 1932 P rice Movements of Industrial, Railroad, and Public U tility Stocks (Standard Statistics Company’s weekly indexes) 76 MONTHLY REVIEW, OCTOBER 1, 1932 issues showed an average increase of % o f a point to a new high level fo r the year, and the average price o f long term Treasury bonds advanced y% point virtually to duplicate the previous high point o f the year. N e w F i n a n c in g A lthough the month of September usually produces a larger volume of new security issues than the preceding month, very little new financing, other than United States Government issues and a $60,000,000 Dominion o f Canada loan, came onto the market during the month just closed. The Canadian financing was a one year 4 per cent note issue, priced at par, which was floated fo r the purpose of refunding a $40,000,000 note m aturity on December 1 and $13,000,000 o f Treasury notes pres ently callable, and fo r general purposes of the Canadian Government. It was announced that this issue was quickly oversubscribed. A prelim inary survey shows about twenty small State and m unicipal security offer ings and three small public utility issues in September, the whole of which aggregated less than $30,000,000, including issues fo r refunding purposes. The public utility issues of long term bonds were priced to yield from 5.79 to 7.50 per cent. Complete figures fo r A ugust show total security flota tions of $171,000,000, o f which only $63,000,000 repre sented new capital. F or the first eight months o f this year, security issues fo r the purpose of raising new capital have totaled $800,000,000; in the same period of 1931, $2,600,000,000 of new capital issues were floated, and in 1930, $5,500,000,000. G o ld M o v e m e n t D uring the month of September there was a gain of about $ 1 0 2 ,000,000 in the monetary gold stock o f the United States, follow ing a rise o f $114,000,000 in August. From the mid-June low point this cou n try’s monetary gold stock has now been increased some $280,000,000, principally as a result o f gold released from the ear marked accounts o f foreign central banks, but also due in part to the receipt o f a sizable amount o f imported gold. F o r the month o f September, the net decrease in the amount o f gold held under earmark fo r foreign account amounted to $72,300,000, the proceeds of which were paid to New Y ork City banks. Included in this amount were funds fo r the redemption of about $15,000,000 of Paris-Lyons-M editerranean Railroad bonds which were called fo r paym ent on September 15. Im ports o f gold at New Y ork during September amounted to about $20,000,000, of which $5,500,000 was received from England, $5,600,000 from Holland, $3,500,000 from Canada, $2,800,000 from India, and $2,200,000 from Mexico. A t San Francisco, $4,000,000 was imported from China and $500,000 from Australia. There were virtually no gold exports. F o r e ig n E x c h a n g e The principal European currencies weakened during September. A fte r a period o f firmness in the first part o f the month, sterling lost ground gradually and closed on the 29th about 2 cents below the A ugust 31 quotation. French francs declined during the first week, recovered temporarily, and then declined again in the latter part o f the month. Swiss francs and guilders extended fu r ther the losses sustained in August and belgas fluctuated around the estimated gold im port point to this country. On the other hand, there was a rise in pesetas after the middle o f the month, and in the Scandinavian group only Swedish crowns failed to gain. The quotations o f South Am erican currencies remained practically unchanged during September, as in recent months. A m ong the F ar Eastern exchanges the yen advanced slightly from its low o f the latter part o f A ugust and steadied at the new level, while Chinese and Indian currencies lost fractionally. Canadian dollars moved irregularly, but the discount was narrowed during the course of the month. Closing Cable Rates at New York Exchange on England.............................. France................................ Italy.................................... Par of Exchange Sept. 30, 1931 Aug. 31, 1932 Sept. 29,1932 $ .1390 .2680 4.8666 .0392 .2382 .4020 .0526 .2680 .1930 .2680 .1930 $ .1398 1.0000 .8800 .5450 .0560 .4200 .8963 .5865 .0763 .4750 .9088 .5865 .0763 .4750 .4925 .2900 .3100 .2288 .2628 .3156 .2420 .2620 .3050 .9648 .1196 1.0342 .4985 .3650 .22 0 0 3.9250 .03940 .2330 .4026 .0512 .2225 .0900 .2300 .1963 $ .1387 .1780 3.4700 .03920 .2379 .4023 .0513 .1740 .0804 .1783 .1938 $ .1387 .1795 3.4519 .03917 .2379 .4016 .0513 .1742 .0818 .1774 .1928 C en tra l B a n k R a te C h an ges There were three more reductions in central bank rates during September. The Reichsbank lowered, its rate from 5 to 4 per cent on September 22, follow ing consent o f the Bank fo r International Settlements to modifica tions in certain statutory provisions with regard to the relation between the discount rate and the legal reserve ratio, and a necessary government decree putting these modifications into effect. The National Bank o f Czecho slovakia reduced its rate from 5 to 4 % per cent on September 26, and the Bank of the Republic o f Colombia lowered its rate from 6 to 5 per cent on the 19th. E m p lo y m e n t a n d W a g e s The recent trend o f factory employment was reversed between J uly and August. F o r the United States as a whole, the seasonally adjusted index o f factory em ploy ment com puted by the Federal Reserve B oard showed 77 FEDERAL RESERVE AGENT AT NEW YORK PER CENT TOTAL EMPL.OYMENT 1 9 2 3 -2 !j AVERAGE-1 0 0 PE: r cent 'A ■..... TEXT‘ILES PRODUCTS x* IRON1 &. s t e e l N ^ \A X. /f \ .1 l .i 1929 l __l. 1930 1 .. , . . L -1 ......1 ... 1931 J .....1 1932 Indexes o f Total Factory Employment, and o f Employment in the Textile Industries and in the Iron and Steel Industries (Federal Reserve Board’s seasonally adjusted series) the first advance since last December and the largest increase since the beginning of the depression. The accom panying diagram shows the recent fluctuations in this index o f factory employment, together with two important components. The A ugust increase in em ploy ment was largest in the textile and associated lines, shown in the diagram, while smaller advances occurred in the leather and food products industries. On the other hand, there were further declines in employment in the heavy industries, illustrated by the reduction shown in iron and steel. No im portant change occurred in the number o f work ers employed in the building trades in August, but an increase was shown in workers engaged in highway con struction, according to the United States Employm ent Service. F actory wage payments in the United States increased about 1 per cent in August, or somewhat less than is usual fo r the time o f year. In New Y ork State, factory employment and p ay rolls increased 4 per cent from J uly to August, which is considerably more than the usual seasonal rise. This is the first advance since September 1931 in the adjusted employment index, and since July 1931 in the payroll index. F o r e ig n T r a d e The value o f this cou n try’s foreign merchandise trade in A ugust was slightly above the low level of the previous month. Imports, amounting to $91,000,000, showed about the normal seasonal increase, while exports, valued at $109,000,000, did not show all o f their usual gain over July. Decreases from a year ago were substantially smaller than in the preceding month, amounting to 34 per cent in the case o f exports and 45 per cent in the case o f imports. The value o f exports o f crude materials was 16 per cent larger than in A ugust 1931, and for all other groups o f exports and all the m ajor groups of imports, declines from a year ago were smaller than in the previous month. The total quantity o f raw cotton exported during August was more than double the low figure o f a year ago and was larger than in the corresponding month of any year since 1921; shipments of raw cotton to European coun tries were nearly fou r times the small volume o f a year ago and were also somewhat larger than in A ugust 1930. The value o f raw cotton exports was 83 per cent greater than in August o f last year but was about one-third less than that of August 1930, due to the lower level o f cot ton prices. The volume o f raw silk receipts increased substantially from July to A ugust and was slightly larger than a year ago. E xports o f wholly and partly finished manufactures continued to show the largest declines from a year ago, and were somewhat less in value than in July o f this year. C rop s The September 1 report o f the Department o f A g ri culture indicates mixed changes from 1931 in the esti mated output o f the principal crops for 1932. Estimated production of winter wheat is 350,000,000 bushels short of last y e a r’s record crop and 1 1 0 ,000,000 bushels below the average production fo r the 1924-1928 period, and this decline is only partly offset by a prospective yield of spring wheat between two and three times last y e a r’s unusually small crop. Production o f tobacco is estimated to be about one-third below last year ’s figure. The apple crop is also about one-third lower than a year ago, and a small decline is indicated fo r the potato crop. The cotton crop this year is forecast at only 11,300,000 bales, which is 5,800,000 bales short o f last y e a r’s large crop and the smallest since 1923; both the area in cultivation and the condition o f the crop are lower than a year ago. On the other hand, the corn acreage is the second highest on record, and production is indicated at 2,850,000,000 bushels, an increase over both last year ’s crop and the five year average. The total hay crop is estimated to be between the short harvest o f last year and the average production from 1924 to 1928, and the forecast of oats is also in excess of last y e a r’s harvest but below the five year average. (In millions) Harvested Crop Corn, bushels.................................... W heat, bushels.................................. Oats, bushels..................................... Hay, tame, tons................................ Apples, total, bushels...................... Potatoes, white, bushels................. Tobacco, poun ds.............................. Cotton, bales.................................... 1924-1928 Average 2,625 829 1,277 73.8 180 361 1,299 15.0 Indicated b y condition 1931 Actual Aug. 1, 1932 Sept. 1 , 1932 2,563 894 2,820 723 1,215 6 7.4 136 367 2,854 715 1,245 1,112 64.2 202 376 1,601 17.1 1,020 11.3 68 .6 138 357 1,028 11.3 P r o d u c tio n A further increase in industrial production of more than seasonal proportions appears to have occurred in September. The outstanding gain continued to be in the cotton goods industry. A s is shown in the follow ing diagram, average weekly output o f cotton goods again increased considerably more than is usual, according to a prelim inary estimate, and sales, although considerably below the record A ugust figure, were larger than in any previous month since F e b ru a ry ; unfilled orders declined 78 MONTHLY REVIEW, OCTOBER 1, 1932 M IL L IO N S O F YAR D S decline, and other decreases occurred in the adjusted indexes of production of pig iron, lumber, wheat flour, and tobacco products. 600 (Adjusted for seasonal variations and usual year-to-year growth) 450 1931 3 00 1932 Aug. June 42 44 60 41 76r 20 19 17 23 46 32 45r 21 20 28 29 41r 29 25 40 59 37 38 25 32 18 24 Fuels Bituminous coal............................................ Anthracite coal.............................................. 76 Petroleum, cru d e.......................................... Petroleum products...................................... 57 75 80 49 40 37 69 67 49 50 36 54p 53p 35 67 p 78 99 77 97 55 42 77 54 60 82 69p 91 91 74 88 83 84 67 84 84 85 64 82 92 76 62 78 83 58 42 78 80 51 76 31 67 76 48 47 30 65 72 27 July Aug. Metals T in deliveries r .............................................. Automobiles Passenger ca rs............................................... M otor trucks................................................. Textiles and Leather Products Cotton consum ption.................................... W ool mill a ctiv ity ........................................ Silk consum ption.................................... Foods and Tobacco Products Livestock slaughtered.................................. Wheat flour.............................................. Sugar meltings, U. S. p o rts ........................ T obacco products......................................... 1929 1930 1931 1932 Statistics of Cotton Goods Production, Sales, Unfilled Orders, and Stocks, Issued by the Association of Cotton Textile Merchants of New York slightly but with the exception of August were the larg est since March 1929, and stocks on hand fell to the lowest level in a number o f years. Gains also predomin ated among other important industries for which figures are available. A ccord in g to weekly reports of steel mill activity, it appears that production of steel ingots in creased somewhat, whereas in past years there has been no consistent change from August to September. Output o f bituminous coal expanded more than seasonally, and production of crude petroleum rose slightly. Automobile production, on the other hand, is reported to have de clined further. D uring August, improvement was discernible in many leading industries, and an increase of 2 points occurred in the Federal Reserve B oa rd ’s seasonally adjusted index o f production of manufactures and minerals, the first advance since last December and the largest gain for any month since February 1931. The principal increase occurred in the textile lines, with average daily con sumption of raw cotton up 30 per cent over July, con sumption of raw silk up 13 per cent, and wool mill activity up 33 per cent, whereas usually there is no im portant change between July and August in these lines. Expansion of more than the usual proportions for this time o f the year was shown in production of shoes and of bituminous coal, and a gain also occurred in the adjusted index of slaughterings of livestock. No important change other than seasonal was shown in output of steel ingots, lead, crude petroleum, and newsprint paper. On the other hand, production of automobiles had a considerable 66 68 68 64 68 78 88 71p Miscellaneous L um ber........................................................... Printing a ctiv ity ........................................... Newsprint p a p er........................................... 72 C o m m o d i t y P r ic e s Wholesale commodity prices continued to advance in the first part o f September, and the weekly index com puted by the Bureau o f Labor Statistics reached a new high since last A p r il; subsequently prices declined slightly. Recent movements of this index are shown in the follow ing diagram, which also indicates the advance that has occurred in farm prices at the farm , as measured by the Department o f A griculture index. In A ugust and September farm prices were 13 per cent above the June low, whereas the general index o f whole sale prices in September was 3 per cent above the June level. A m ong individual commodities, the outstanding in crease during September was in domestic wool, which rose 10 cents a pound to 45 cents, the highest level since March and 14 cents above the J u ly low. The price of silk advanced in the first week o f September to the high est point since February, and hides rose to 8^/2 cents a pound, more than double the July low. Scrap steel at Chicago advanced further, the price of copper increased early in the month to 6 % cents a pound, the highest since March, and zinc rose to a peak of 3 % cents a pound, more than 1 cent above the May low and the highest point reached since last October. Subsequently, how ever, there were moderate reactions in some of these com- 79 FEDERAL RESERVE AGENT AT NEW YORK PER CENT General and Department o f Agriculture Index of Farm Prices at the Farm modities. The principal decreases were in corn, which declined to a new low level fo r recent years, and in cotton, which lost about half o f the June-August re covery. Net declines occurred also in wheat, rubber, and lead. There was little net change fo r the month as a whole in livestock, sugar, petroleum, silver, and tin, although early in September the price of tin reached the highest level in about a year. B u il d i n g The A ugust value o f building and engineering con tracts awarded in the 37 Eastern States covered by the F. W . Dodge Corporation report was 4 per cent larger than the J u ly figure, and with the exception of May showed the largest amount so fa r this year. The increase reflected entirely an unseasonal increase in awards for public works and utilities combined. Residential build ing, after adjustment fo r the usual seasonal movement, remained at a low level and other non-residential build ing showed no significant change. Total contract awards reported during the first three weeks of September con tinued at about the A ugust level, due to more than sea sonal increases in residential building and in public works and utilities contracts, which offset a decline in other non-residential construction. Consequently it ap pears that the total contract volume in the third quarter o f this year was not materially different from that of the second quarter, whereas ordinarily there is a seasonal reduction. In the Metropolitan area o f New Y ork, an increase of 31 per cent was reported in contract awards between July and August, contrary to the usual tendency. A ll o f the m ajor construction categories contributed to the increase, a rise o f 26 per cent in residential building be ing produced by increased construction of one and two fam ily houses. I n d e x e s o f B u s in e s s A c t i v i t y So far as may be determined from the limited amount o f data now available, it appears that business activity increased somewhat in September. Car loadings both of merchandise and miscellaneous freight and of bulk mate rials showed more than the usual increase during the first three weeks o f September, and department store sales in New Y ork City and vicinity in the first half of the month showed the smallest decline from a year ago since January. Bank debits outside o f New Y ork City in creased seasonally and electric power production rose slightly more than is usual, according to preliminary estimates based on weekly figures. In August, no definite tendency was apparent in gen eral business activity, according to this bank’s indexes. Car loadings o f bulk freight expanded more than usually, and a large gain was shown in the adjusted index o f wholesale trade. W ith the exception o f the usual seasonal variations, there was little change in railroad loadings of less than car load and miscellaneous freight, in imports o f merchandise, and in sales o f chain grocery stores. On the other hand, declines occurred in the adjusted indexes o f sales o f department stores, sales of chain stores other than grocery chains, bank debits outside o f New Y ork City, and merchandise exports. (Adjusted for seasonal variations, for usual year-to-year growth, and where necessary for price changes) 1931 1932 Aug. June July 72 64 58 74 58 89 55 38 45 65 32 79 51 41 43 53 31 77 51 43 40p 53p 89 91 90 82 74 85 48 76 74 76 73 59 81 41 73 72 76 69 55 61 28p 69 73 71 64 54 Aug. Primary Distribution Car loadings, merchandise and misc....... Car loadings, other................................... Waterways traffic...................................... Wholesale trade......................................... 87 Distribution to Consumer Department store sales, 2nd Dist............ Chain grocery sales................................... Other chain store sales............................. Mail order house sales.............................. Advertising................................................ Gasoline consumption............................... Passenger automobile registrations.......... General Business Activity Bank debits, outside of New York City.. Bank debits, New York City................... Velocity of bank deposits, outside of New York City.............................................. Velocity of bank deposits, New York City Shares sold on N. Y. Stock Exchange. . . Postal receipts........................................... Life insurance paid for............................. Electric power........................................... Employment in the United States.......... Business failures........................................ Building contracts..................................... New corporations formed in N. Y. State. Real estate transfers................................. 81 67 64 62 65 61 60 60 86 77 76 81 90 83 76 104 50 95 52 76 61 59 69 76 68 61 129 22 94 48 81r 61 75 77 65 229 74 68p 60 139 27 91 42 76 66p 60 140 29 99 43 General price level*................................... Composite index of wages*...................... Cost of living*........................................... 149 206 148 129 182 130 129 179p 134 132 179p 134 p Preliminary r Revised * 1913 average= 100 D e p a rtm e n t S to re T r a d e Total A ugust sales o f the reporting department stores in this district were 16 per cent below the previous year, the smallest reduction in monthly sales since February, but the decline in average daily sales was about the same as in other recent months, as in the various localities o f this district there were 1 % or 2 more shopping days in August this year than in 1931. The New Y ork and Rochester stores showed much the same reductions in daily average sales as in the previous month, and the MONTHLY REVIEW, OCTOBER 1, 1932 80 Newark stores reported the smallest decrease in several months. In other localities of the district, however, daily average sales o f the reporting stores generally showed somewhat larger year to year reductions than in July. The daily rate of sales in the leading apparel stores also showed a somewhat larger decline than in July. D uring the first half of September, department store sales in the Metropolitan area of New Y ork declined only 17 per cent from the corresponding period o f last year, indicating the smallest decrease in the daily rate o f sales since January. Stocks o f merchandise on hand at the end of August, at retail valuations, continued to show a progressive decline from a year ago, and the percentage o f charge accounts collected during A ugust was again somewhat lower than last year. Percentage change from a year ago Net sales Per cent of accounts outstanding July 31 collected in August Jan. to Aug. Stock on hand end of month 1931 1932 — 15.4 — 2 6.0 — 20.7 — 31.5 — 10.2 — 22.2 — 23.8 — 28.4 — 22.8 — 26.6 — 20.5 — 25.7 — 21.3 — 23.6 — 24.9 — 28.6 — 18.9 — 25.9 — 22.8 — 2 6.0 — 2 7.0 — 27.3 — 19.0 —20.0 — 14.6 — 15.6 36.4 4 3.0 34.4 23.7 33.1 34.6 2 9.0 34.9 40.6 37.3 All department stores............ — 16.3 — 21.4 — 24.3 34.8 32.4 Apparel stores......................... — 22.0 — 25.2 — 27.5 34.8 35.5 Locality Aug. New Y o r k ......................................... B uffalo............................................... Rochester.......................................... Syracuse............................................. N ew ark.............................................. B ridgeport........................................ Elsewhere.......................................... Northern New Y ork State........ Southern New York State........ Hudson River Valley District. . Capital D istrict........................... W estchester.................................. Toilet articles and drugs....................... W oolen g ood s.......................................... H osiery...................................................... M en’s furnishings.................................... M en’s and B oys’ w ea r.......................... W om en’s ready-to-wear accessories.. . Silks and velv ets..................................... C otton good s........................................... T oys and sporting goods....................... Shoes............... .......................................... Books and station ery............................ Luggage and other leather goods........ Linens and handkerchiefs..................... Home furnishings.................................... Silverware and jew elry.......................... Furniture................................................... W om en’s and Misses’ ready-to-w ear.. Musical instruments and ra d io........... M iscellaneous.......................................... 21.0 since the first quarter o f the year, and sales o f hardware, shoes, cotton goods, jew elry, and diamonds, though con tinuing substantially below A ugust 1931, did not show as large declines as in the previous month. Sales o f m en ’s clothing and machine tool orders were reduced from a year ago by about as large an amount as in August. Stocks o f merchandise on hand at the end o f A ugust continued to show about the same reductions from a year ago as in, July. Collections in A ugust o f this year were about the same as in A ugust 1931, and were higher than in July. C omm odity Percentage change August 1932 compared with July 1932 Net sales M en’s clothing............... Cotton g o o d s ................. Drugs............................... Hardware........................ Machine tools**............ Paper................................ 29.2 32.4 2 5.0 Weighted average... + 0 .5 + 1 7 1 .7 + 4 3 .6 + 1 1 8 .7 * + 4 5 .7 + 6 .7 — 4 .7 + 1 1 .9 + 1 3 .5 + 8 .1 + 7 9 .3 + 1 2 4 .3 Stock end of month Net sales — 12.3 — 65.5 — 24.3 + 3 .0 — 13.2* + 2 4 .9 * — 9 .1 — 31.4 + 1 4 .4 + 2.1 — 30.7 — 2 .5 — 60.5 — 18.9 — 27.3 — 4 .5 — 59.6 —4 1 .0 — 8 .0 + 4 .0 + 5 8 .1 Stock end of month — 13.5 — 39 '.8 — 13.6* — 24.6 — 8 .9 — 21.0 — 29.5 — 30.1 — 2 6.6 Per cent of accounts outstanding July 31 collected in August 1931 1932 74.7 34.3 33.6 53.9 36.9 3 1.0 45.1 76.4 2 9.9 2 9.4 79.2 32.8 2 3 .0 41.9 66.9 4 6 .6 } 15.4 } 14.0 4 8.5 4 8.4 55.4 38.4 * Quantity not value. Reported b y Silk Association of America ** Reported b y the National Machine T ool Builders Association Net sales percentage change August 1932 compared with August 1931 Stock on hand percentage change August 31, 1932 compared with August 31, 1931 + 3 .4 + 0 .2 — 7 .6 — 8 .4 — 9 .0 — 11.3 — 13.4 — 13.5 — 14.6 — 14.9 — 15.9 — 16.0 — 16.7 — 17.6 — 20.3 — 24.2 — 27.4 — 57.5 — 8.6 + 1.6 — 29.1 — 40.3 — 26.9 — 22.8 — 30.9 — 26.8 — 26.4 — 20.1 — 22.9 — 26.9 — 33.2 — 24.4 — 25.1 — 15.9 — 32.5 —4 1 .5 — 32.2 — 31.6 C h a in S t o r e T r a d e A ugust sales of the reporting chain stores in this district averaged about 13% per cent smaller than in the previous year, which is a slightly larger decline than in other recent months despite the fact that there was one more selling day in A ugust this year than in 1931. The grocery and candy chains continued to report com paratively small reductions from a year ago, but ten cent, variety, and drug chain organizations showed re ductions o f slightly more than 15 per cent, and the shoe chains again reported a large drop in the dollar volume o f sales. G rocery and shoe chains had slightly smaller decreases in sales per store than in total sales, reflecting a decline in the number of units operated, while other types of chains which have increased the number o f stores over a year ago reported larger declines in unit sales than in the total. Percentage change August 1932 compared with August 1931 W h o le s a l e T r a d e The August sales o f the reporting wholesale firms aver aged 27 per cent below last year, a somewhat smaller reduction than in July. Sales of silk goods, reported in yardage by the Silk Association of America, and also drug sales showed increases in August follow ing declines in J u ly ; in the case of silk goods, the increase was the first to be reported this year. Grocery, paper, and sta tionery concerns had the smallest reductions in sales Percentage change August 1932 compared with August 1931 T ype of store Number of stores Total sales Sales per store D r u g ................................................. S h oe.................................................. — 0 .5 + 1.4 + 0 .2 — 2 .3 + 3 .7 + 12.6 — 6 .3 — 16.3 — 17.4 — 2 5.0 — 15.3 — 3 .6 — 5 .8 — 17.5 — 17.6 — 23.2 — 18.3 — 14.3 T o ta l........................................ + 0 .8 — 13.6 — 14.3 FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, OCTOBER 1, 1932 Business C onditions in the U nited States (Summarized by the Federal Reserve Board ) O L U M E of industrial production increased from J u ly to A u g u st by con siderably more than the usual seasonal amount, reflecting chiefly expansion in activity at textile mills. Wholesale prices advanced during A u g u st and the general level prevailing in the first three weeks of September was somewhat higher than in other recent months. There was a further growth in the country’s stock of monetary gold and a non-seasonal return flow of currency to the Reserve Banks. V P r o d u c t io n a n d E m p l o y m e n t Index Number o f Production o f Manufactures and Minerals Combined, Adjusted for Seasonal Variation (1923-25 a v e r a g e s 100 per cent) 1927 1928 1929 1930 1931 1932 Index Numbers o f Factory Employment and Payrolls, W ithout Adjustm ent for Seasonal Variation (1923-25 average=100' per cent) PERCENT >0“ ' .. ..... Indu strial output increased substantially in A u g u st and the B o a rd ’s seasonally adjusted index showed an advance from 58 to 60 per cent of the 1923-25 average. A ctivity at cotton, woolen, silk, and rayon mills increased from the low level of other recent months by considerably more than the usual seasonal amount, and there was also a substantial increase in activity at shoe factories. Output of automobiles, however, declined further and production in the steel and lumber industries showed none of the usual seasonal increase in August. D u rin g the first three weeks of September there was a slight advance in steel output. Em ploym ent at factories increased slightly more than is usual at this season. There were large additions to w orking forces in the textile, clothing, and leather industries, while in the automobile, tire, and machinery industries and at car-building shops the number employed decreased further. Aggregate wage payments increased less than seasonally. B u ild in g contracts awarded up to September 15, as reported by the F. W . Dodge Corporation, indicate that for the third quarter the total value of contracts w ill be about the same as for the second quarter, whereas usually awards for the third quarter are smaller. Currently, contracts for public works are a considerably larger part of the total than they were at the beginning of the year and residential contracts are a smaller part. Department of Agriculture crop estimates based on September 1 conditions indicate little change in prospects during August. Indicated crops of wheat and tobacco are considerably smaller than in other recent years, while the corn crop is the largest since 1925. The cotton crop is estimated at 11,800,000, a decrease of about 6,000,000 bales from the large crop of a year ago. A y. v D is t r ib u t io n ■ >TAL Volume of merchandise and other freight handled by the railroads increased seasonally during August, while during the corresponding period a year ago no increase was reported. Department store sales of merchandise increased from Ju ly to A u g u st by somewhat less than the usual seasonal amount. N \ A A A o W h o l e s a l e P r ic e s RESIId e n t ia l N ft V -0¥ = V - \ \ V --------------s o Index Numbers o f Building Contracts Based on Three Month M oving Averages o f F. W . Dodge Corporation Data for 37 States, Adjusted for Seasonal Variation (1923-25 a v e r a g e s 100 per cent) MILLIONS OF DOLLARS 6000i 1927 1928 1929 1930 1931 1932 Federal Reserve Bank Credit and Principal Factors in Changes (M onthly averages o f daily figures; latest figures are averages o f first 21 days o f September) Wholesale commodity prices advanced from 64.5 per cent of the 1926 aver age in J u ly to 65.2 per cent in August, according to the monthly index of the Bureau of Labor Statistics. D u rin g A u g u st prices of many leading commodities including textile raw materials and finished products, wheat, hides, nonferrous metals, sugar, rubber, and coffee, increased substantially. I n the first half of September there were declines in the prices of many of these commodities, while prices of wool and woolen goods, cattle, and hides advanced. B a n k C r e d it D u rin g recent weeks further growth in monetary gold stock, a return flow of currency from hoards, and new issues of N ational bank notes have resulted in additions to the reserve funds of member banks. These banks have employed a part of the funds in further reducing their borrowings at the Reserve Banks, and have accumulated a part as reserve balances, which at the present time are more than $300,000,000 in excess of required reserves. Reserve B a n k holdings of United States Government securities and of acceptances remained practically unchanged during the four weeks ended September 14, while the total of Reserve B a n k credit declined by $43,000,000 through the reduction of discounts for member banks. Loans and investments of reporting member banks in leading cities showed little change between the middle of A u g u st and the middle of September. A further decline of more than $150,000,000 in loans b y banks outside New Y o rk City during the past four weeks was offset in large part by continued increase in investment holdings, chiefly at member banks in New Y o rk City. There was a considerable growth in deposits of reporting member banks, reflecting in part larger balances held by city banks for the account of other banks. M oney rates in the open market remained unchanged at low levels during A u g u st and the first half of September.
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