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MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Eeserve Agent B u s in e s s F e d e r a l D is t r ic t October 1, 1935 Federal Eeserve Bank, New York M o n e y M a r k e t in S e p t e m b e r A pparently influenced by threats of war, a substantial further movement of funds from Europe to the United States fo r deposit or investment occurred in September, which weakened foreign currencies in this market and led to a movement of gold to this country which has already totaled over $225,000,000 including amounts actually shipped or engaged for shipment. The persistent movement of gold to the United States since the devaluation of the dollar, together with the smaller but steadier supplementary supply of monetary gold obtained from domestic sources, is reflected in the changes in the gold stock shown in the accompanying diagram. Gold has flowed to this country in recurrent waves since the early part of last year. A fter the first movement in response to devaluation of the dollar, these waves appear to have been related largely to changes in political and economic conditions abroad. The total increase in the gold stock o f this country since the end o f January 1934 will amount to approximately $2,500,000,000 when the gold now en route to this country has been received. Accom panying this extraordinarily rapid increase in the gold stock there has been a more than corresponding increase in the reserves of member banks. The reserve balances of all member banks in the Federal Eeserve Banks rose from $2,736,000,000 on February 7, 1934 to $5,388,000,000 on Septetmber 11, 1935, or considerably more than twice the existing reserve requirements, and after a temporary reduction in the third week o f Sep tember a renewed increase occurred in the latter part o f the month. Thus, largely as the result o f the heavy inflow o f gold, member bank reserves have nearly doubled in less than two years, and the basis has been created fo r a huge potential expansion o f member bank credit. The tem porary reduction in member bank reserves in the week ended September 18 was due partly to income tax collections and partly to cash sales of new Govern ment securities on September 16, which considerably exceeded Government interest payments and other dis bursements during that week. Under present conditions, when most member banks have substantial amounts o f excess reserves, an unusually large proportion o f new Government securities is paid fo r in cash, rather than with deposits credited to the Government. O f the $512,000,000 o f Treasury notes sold on September 16 a little more than half were paid fo r in cash. The reduction in R e s e r v e C o n d itio n s member bank reserves resulting from these payments and income tax collections is expected to be temporary, as the resulting accumulation of Government deposits in Federal Reserve Banks will gradually be disbursed by the Treasury and thus w ill again increase the aggregate amount of member bank reserves. Another factor tending to cause a tem porary reduc tion in member bank reserve balances is the seasonal demand fo r currency. In the week ended September 4 the amount o f currency reported as in circulation showed an increase of $ 7 7 ,000 ,000 , and, although there was some retirement of currency after the Labor Day holiday, the amount outstanding on September 25 showed a net increase of more than $50,000,000 com pared with a month earlier. A further increase in the amount of currency in circulation usually occurs during the early part of October, but this year w ill probably be more than offset in its effect on the total reserves of member banks by the inflow o f gold now in progress. M ember B a n k € redit Due largely to purchases o f the new Government securities issued on September 16, the total loans and investments o f weekly reporting member banks showed an increase o f nearly $600,000,000 during the fou r weeks ended September 25, and reached the highest level in nearly fou r years. New Y ork City banks reported an increase o f $ 3 3 9 ,000,000 during the fo u r week period, and their total loans and investments reached the highM IL L IO N S 74 MONTHLY REVIEW, OCTOBER 1, 1935 est level since September 1931. In other principal cities throughout the country the loans and investments o f reporting member banks showed an increase of $254,000,000 during the period, and in this case also the vol ume on September 25 was the highest in several years. Direct obligations of the United States Government held by New Y ork City banks showed a net increase of $176,000,000 during the four weeks, and in other weekly reporting banks there was an increase of $147,000,000. In addition, an increase of $54,000,000 in Government guaranteed securities was reported, largely by banks outside of New York. Other security holdings of the New Y ork City banks increased $43,000,000 further, but such holdings by other reporting banks throughout the country showed little change. Loans other than security loans increased $63,000,000 further in New Y ork City during the four weeks ended September 25, and in other principal cities there was a further increase of $57,000,000. Since the low point of the year was reached at the end of July there has been an increase of slightly over $ 2 0 0 ,000,000 for all report ing banks, but, toward the end o f the period, a part of the increase appears to have represented temporary loans on gold in transit to this country. Comparison with a year ago continues to show a reduction in the total vol ume o f loans other than security loans amounting to about $150,000,000, but the greater part o f this de crease represents a reduction in bankers acceptances held by the reporting banks, rather than a further reduction in ordinary loans to customers. Government financing of domestic storage o f commodities has re placed bank financing in substantial amount during the past year, and a considerable further reduction has occurred also in acceptance credits on foreign business. Security loans in New Y ork City banks, after reaching the lowest point in several months at the end o f August, showed a net increase o f $50,000,000 for the four weeks, but security loans o f other weekly reporting banks declined slightly to a new low point for recent years. M o n ey R ates Government Securities The decline in the Government security market which began in August progressed somewhat further in Sep tember before a firmer price tendency developed. A t the beginning of the month, the average yield on all outstanding Treasury notes of 1 to 5 year maturity stood at 0.78 per cent and the average yield on outstanding Treasury bonds not callable within 5 years was 2.58 per cent. B y September 13, these average yields had advanced gradually to 0.85 per cent and 2.63 per cent, respectively. On September 16, the inclusion o f the new note and bond issues and the dropping of a note issue that came within one year o f maturity raised average yields by 0 .1 1 per cent for the notes and 0 .0 1 per cent fo r the bonds to 0.96 per cent and 2.64 per cent, respectively. In the succeeding few days the aver age note yield rose further to 1.03 per cent, as compared with the recent low o f 0.47 per cent, and the bond yield average advanced to 2.71 per cent, as against the recent low o f 2.39 per cent. Subsequently, somewhat firmer conditions prevailed in both the note and bond markets, the yield on all Treasury notes averaging 0.96 per cent toward the end of September, and the yield on Treasury bonds averaging 2.67 per cent. On a price basis, the net decline in Treasury bonds amounted to less than % of a point in September, which is about one-half of the recession that occurred in August. The accom panying diagram indicates the comparative movements in prices o f United States Government and British Government securities during 1934 and 1935. In both cases, yields are now about 1 /3 of one per cent above the lowest levels reached this year, but yields on British Consols are now higher than at the beginning of 1935, while yields on United States Treasury bonds are still lower than at the opening of the year. The largest part of the rise in the yield on British Consols occurred in the first quarter of the year, whereas yields on United States Treasury bonds continued to decline through A pril, and then held steady until August before showing a material advance. The principal change in money rates during Sep tember was a continuation of the moderate increase in yields on Government securities which was reported in August. M oney Hates at New York Sept. 28, 1934 Aug. 30, 1935 Sept. 30, 1935 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial paper— 4 to 6 months Bills— 90 day unindorsed......................... Customers’ rates on commercial loans.. (Average rate of leading banks at middle of month) Treasury securities: Maturing June (y ie ld )......................... Maturing February 1937 (y ie ld ). . . ^ Average yield on Treasury notes (1-5 y ea rs)....................................................... Average yield on Treasury bonds (more than 5 years to earliest call d a te). . Average rate on latest Treasury bill sales: 182 day issue.......................................... 273 day issue.......................................... Federal Reserve Bank of New York re discount ra te........................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills 1 * H -l H -l 3/16 2.08 N o yield H H Vs H H yk 1.75 1.67 No yield 0 .1 7 0 .0 2 0 .2 1 1.82 0 .79 JO. 96 3 .1 8 2 .5 9 t2 .6 7 0.i3 0.2 3 0 .29 iy2 iy 2 IX y2 y2 y2 * Nominal J Average raised 0.11 by substitution of new issue for an issue maturing within one year. f Average raised 0.01 by inclusion of new issue. Yields on United States and British Government Bonds (Scale inverted to show movements of prices) FEDERAL RESERVE AGENT AT NEW YORK E arly in September, holders of approxim ately $1,250,000,000 o f Fourth Liberty Loan bonds which had been called for redemption October 15, 1935 were given the privilege of exchanging them fo r 1 0 - 1 2 year 2 % per cent Treasury bonds, or for 3 % year i y 2 per cent Treasury notes. B efore the subscription books for the notes were closed, on September 14, $429,000,000 of Fourth L ib erty ’s were turned in fo r exchange; the sub scription books fo r new Treasury bonds were still open at the end of September, and $397,000,000 were issued in exchange for Liberty bonds through September 28. In addition to the exchange of Liberty Loan bonds fo r new issues of Treasury bonds and notes, the Treasury sold $512,000,000 of the 1V2 per cent 3y2 year Treasury notes on cash subscription. Four $50,000,000 maturi ties of 182 day Treasury bills were replaced with issues of similar amounts of new 273 day bills at rates which moved upward on successive sales to 0.23 per cent on the issue dated September 25, as compared with 0.13 per cent on the last August issue. Arrangements were made also to obtain $50,000,000 of new funds through the issuance on October 2 of $50,000,000 of 166 day bills (due on the March 1936 quarterly tax date) and of $50,000,000 of 273 day bills to replace a maturity of $50,000,000 of 133 day bills. B il l s a n d C o m m e r c ia l P a p e r D uring September several moderate sized blocks of bills were sold in the market by New Y ork City banks and were quickly resold by the dealers, but on the whole the bill market continued in the inactive state that has prevailed for some time past. Rates likewise were unchanged. The total volume o f bills outstanding at the end of August was $321,800,000, an amount $900,000 larger than at the end of July, the first increase since last October. There were increases during August of $5,500,000 in domestic warehouse bills outstanding, $ 2 ,400.000 in import bills, and $1,400,000 in bills drawn fo r the purpose o f creating dollar exchange, but these increases were largely offset by further decreases of $4,900,000 in export bills and $3,400,000 in bills based on goods stored in or shipped between foreign countries. A moderate increase in the supply of new commercial paper was reported to have occurred during September, reflecting in part at least borrowings by concerns whose operations are associated with the fall movement of crops. Supplies in general, however, were greatly ex ceeded by the bank investment demand fo r business notes, which showed no sign of abatement. The prevail ing rate for prime four to six month commercial paper continued to be % per cent, and in fact a small amount o f especially choice paper maturing at the year-end was sold at y2 per cent around the middle of the month. A t the end of August commercial paper houses had $176,800.000 of paper outstanding as against $163,600,000 at the end of July. S e c u r it y M a r k e t s D uring the first ten days of September a renewed advance occurred in stock prices which raised the gen eral average of quotations to the highest level since July 1933. Industrial stocks as a class reached the highest point since 1931, as the accom panying diagram indi- 75 Price Indexes of Industrial, Public Utility, and Railroad Stocks (Standard Statistics weekly indexes; 1926 average = 100' per cent) cates, but railroad and public utility shares remained below points reached on previous recoveries in 1933 and 1934. D uring the next week, prices moved without any definite tendency, but on September 19 and 20 there was a substantial decline, accom panying reports of in creased tenseness in Europe arising out of the ItalianEthiopian controversy. In the succeeding part of the month, stock prices recovered a part of the decline, although movements became increasingly irregular. The net result of the m on th ’s fluctuations in stock prices was a rise of about 3 per cent in industrial stocks, a fractional gain in rail issues, and a slight decline in public utility shares. Bank stocks receded about 12 per cent further in September follow ing a slight decline in the second half of August from the temporary peak reached around mid-August. Domestic corporation bonds on the whole showed an advancing tendency during September. The extent of the gains for the month was inverse to the grade o f the bonds, the medium grade bonds showing an average advance of about % to 1 point while the highest grade issues showed virtually no net change. The steadiness in high grade issues, however, follow ed a decline of about 2y2 points in July and August. In the foreign bond market, a representative price average dropped about 1 point during the third week of September, reflecting largely declines in Italian issues, but prices subsequently firmed somewhat. N e w F i n a n c in g The rate of offering of new domestic security issues quickened considerably in September follow ing some decline in August, but the total did not equal the large volume put out in July. Both corporate and State and municipal issues appeared in larger volume than in August. A ccordin g to weekly data, corporate flotations amounted to about $250,000,000 in September, most of which continued to be refunding issues. In this category, the largest issues were $57,500,000 by the Southern C alifornia Edison Company, $50,000,000 by the SoconyYacuum Oil Company, and $49,000,000 by the Detroit MONTHLY REVIEW, OCTOBER 1, 1935 Edison Company. There were several other issues of from 3)16,000,000 to $24,000,000. Coupon rates on the large issues of long term bonds ranged from 3 to 4 % per cent. State and municipal financing exceeded $100,000,000, including principally $30,000,000 State of New Y ork emergency unemployment relief 2 ^ per cent serial bonds and $20,000,000 State o f Tennessee high way 3.90 per cent bonds. There was also a $15,000,000 issue of Federal Intermediate Credit Bank debentures, which in part replaced maturities. Public offerings of securities during September included a new type of investment medium. This was the offering o f a total of $1,250,000 of real estate mortgages insured b y the Federal H ousing Administration, yielding from 4 % to 5 per cent. DOLLARS 5.00 4,9 0 4.8 0 4 .7 0 .06 74 .0666 .06 5 8 .06 50 .690 D £xpo .680 F o r e ig n E x c h a n g e s .670 In the second half of August and in September the dollar for the first time since January advanced simul taneously against both the pound and the European gold exchanges. D uring previous periods of weakness in Continental European gold currencies recently, these exchanges declined in terms of dollars to a point where gold shipments from Europe to the United States be came profitable, but the pound, being free to fluctuate subject only to the operations of the British Exchange Equalization A ccount, advanced on these occasions more sharply than did the dollar. This tendency was particu larly evident in March, A pril, and May of this year, as the accom panying diagram shows. The pound advanced from about $4.75 in the middle of March to $4.95 at the end o f May, during a period when either the French franc, the guilder, or both were in the vicinity of their respective gold im port points. The strength of sterling at that time contrasts sharply, however, with the ten dency shown during the latter half of August and Sep tember. A fte r reaching a high o f $4.98% on August 14, the day on which, according to an announcement by the Secretary of the Treasury, the United States purchased over 25,000,000 ounces of silver abroad, sterling showed a downward movement in the second half of the month, and the recession proceeded further during September, the rate touching a low of $4.91% on September 20. Uncertainty regarding the political situation in Europe was reported to have contributed to the decline in the sterling-dollar rate, particularly after the middle of September. A m ong the gold bloc currencies, both the French franc and the guilder were quoted during most o f September at or below their gold im port points to the United States, and further gold shipments to New Y ork from Paris and Amsterdam were undertaken. Pronounced weakness in the guilder became evident immediately prior to the reconvening of the Netherlands Parliament on Septem ber 17 to consider the Governm ent’s proposed fiscal measures. The drop in the franc, however, seemed to be largely unrelated to developments within France, and was due rather to external technical influences growing out of the special position occupied by the franc as the principal exchange through which official operations in support o f other m ajor foreign currencies are under taken. o 1 ________ r 76 .660 N. POlt' \ GOLD V !lMPORT POINT V \ f ' V GUILIDER j ‘V m a m j j a s Movements of Foreign Exchange Rates at New Y ork (Latest quotations are for September 27) The sterling area currencies moved about in keeping with the pound, while a number o f European currencies, including the Italian lira, the Swiss franc, and the official rate fo r the reichsmark, were approxim ately stable in terms o f French exchange. The Brazilian free milreis showed an upw ard tendency during September for the first time since the extension o f the free market in February 1935, and the Argentine peso advanced sharply in the free market during the second half o f the month. Closing Cable Rates at New York Exchange on Sept. 29, 1934 Aug. 31, 1935 Sept. 30, 1935 H ollan d........................................................ $ .2357 .2217 4.9613 .06646 .4056 .6834 .0865 .2495 . 1378 .2560 .3290 B razil............................................................ 1.0275 .3308 .0825 .8000 .9950 .3313 .0863 .8075 .9888 .3273 .0863 .8050 .2910 .3744 .3661 .2934 .3755 .3688 .2882 .3715 .3831 D enm ark..................................................... $ .1682 .2217 4.9625 .06603 .4020 .6767 .0816 .2494 .1368 .2558 .3261 $ .1690 .2193 4.9100 .06590 .4024 .6769 .0815 .2467 .1366 .2530 .3254 G o ld M o v e m e n t The renewed inflow o f gold from Europe which devel oped around the middle o f September reached substantial proportions in the succeeding two weeks, and fo r the month as a whole, gold imports into the United States totaled $150,000,000. O f that amount $40,000,000 was received from France, $37,000,000 from England, $37,000,000 from Holland, $20,000,000 from India, $15,000,000 from Canada, and $1,000,000 from China. In addition to these imports, $1,100,000 o f gold was released from earmark fo r foreign account at the New FEDERAL RESERVE AGENT AT NEW YO R K Y ork Reserve Bank, and there were further deposits of newly mined domestic gold and scrap gold at the mints and assay offices averaging about $2,500,000 and $700,000 per week, respectively. A s a result prim arily of the gold im port movement from England and the Continent, a total of approximately $165,000,000 was added to the monetary gold stock of this country during September. C e n tr a l B a n k R a t e C h a n g e s On September 9 the Bank o f Italy raised its discount rate from 4 % to 5 per cent, follow ing an increase from 3 % to 4 % per cent on A ugust 1 2 . The Netherlands Bank rate was raised from 5 to 6 per cent on September 17, follow ing a renewed outflow of gold. P r o d u c tio n The rate o f steel m ill operations was little changed from August to September although requirements o f the automobile industry fo r steel declined in connection with the stoppage of assembly lines and preparations for new models. The output of bituminous coal increased during the first two weeks of September, in renewed anticipa tion of labor difficulties, but the materialization of the strike on September 23 affected the rate of production until October 1 and consequently reduced total produc tion for the month as a whole. E lectric power produc tion remained approximately unchanged in September, while cotton consumption, indicative of activity at cot ton textile mills, increased seasonally. The level of industrial production on the whole was well maintained during A ugust and the B oa rd ’s sea sonally adjusted index of industrial production stood at 86 per cent of the 1923-25 average, the same as in the two preceding months. The sub-index of manufactures rose one point to 87, while that of minerals declined three points to 81 as a result of a sharp shrinkage in anthracite coal output. The rate of steel output increased 24 per cent from July to August, and activity was also greater in meat packing and sugar refining plants. Cotton mills expanded operations in accord with the seasonal experience of past years, and production of woolen textiles increased more than seasonally. However, there was a substantial decline in the rate of automobile PER C E N T lO O r ^TR UCKS 80 60 40 20 1929 1930 1931 1932 1933 1934 1935 Production of Passenger Automobiles and M otor Trucks During First Eight Months o f Past Seven Years (Output for first 8 months of 1929 n: 100 per cent) assemblies, and shoe production increased by less than the usual amount. Machine tool orders, which had risen steadily from February to July, were little changed from the previous month. A s the automobile season fo r 1935 models draws to a close, figures fo r the year to date make favorable com parisons with the preceding five years. A s the accom panying diagram shows, production o f passenger cars in the first eight months o f 1932 had dropped to 25 per cent o f the total fo r the corresponding period in 1929. In the two follow ing years production doubled and the further gain this year brought output to 64 per cent of the 1929 level, surpassing the figures fo r all other years since 1929. Truck production shows a consistently more favorable comparison with its 1929 total than passenger car output, dropping to 29 per cent in 1932, and recover ing this year to 87 per cent o f the 1929 level. (Adjusted for seasonal variations and usual year to year growth) 1934 1935 Aug. June July Aug. 32 33 38 50 45 53 48 67 45 56 50 53 69 50 67 40 83 58 59 10 2 10 1 M etals _ 68 Autom obiles Passenger cars............................................... M otor trucks................................................. 39 p 92 p Fuels Bituminous coal............................................ Anthracite co a l.............................................. Petroleum, crude.......................................... Petroleum products...................................... Electric p ow er............................................... 66 58 85 112 67 72 69 67 74 72 73 65 87 96 71 116 55 85 97 68 60 67 69 69 7bp 63 p 43 p 72 72 127 70 p 116p 96p 68 p 76 p Textiles and Leather Products C otton consum ption.................................... • W ool mill a ctiv ity........................................ Silk mill a ctiv ity ........................................... R ayon deliveries*......................................... 12 1 60 105 105p Foods and Tobacco Products M eat packing................................................ W heat flour r ................................................. Refined sugar deliveries.............................. T obacco products......................................... 72 79r 62 132 SOr 77 82 70 85 r 83 86 40 52 73 34 44 50 73 76 42 51 69 106 68 81 68 r 108p 81 Miscellaneous Newsprint p a p er........................................... Machine to o ls ................................................ p Preliminary r Revised 36 70 p 99 * For quarter ended E m p lo y m e n t a n d P a y r o lls (P A S S E N G E R CARS 1 77 From the middle of July to the middle of August employment and payrolls in representative New Y ork State factories increased by considerably more than the usual seasonal proportions. The seasonally adjusted index of employment showed an increase o f approxi mately 1 per cent over the preceding month, reaching the highest point since May .1931, and the adjusted index o f payroll disbursements advanced more than 3 % per cent to the highest level since September 1931. Much of the gain in employment and payrolls was trace able to unusually early fall activity in the clothing indus try, although most o f the other industries reported some net increase in the number of workers and in the amount o f payrolls. F o r the entire country likewise, factory employment and payrolls showed greater gains between the middle of July and the middle o f August than has been usual in 78 M O N T H L Y R E V I E W , O C T O B E R 1, 1935 PER CENT 120r 100 1 9 2 3 - 2 5 AV * 1 0 0 P E R C E N T 80 1935 60 M933 40 chain grocery sales, life insurance sales, and the volume o f check transactions outside New Y ork City were among the important indicators that showed little change other than seasonal from July to August. Advances o f more than the average proportions occurred, however, in bulk freight shipments and department store sales, and the seasonally adjusted index of adver tising also rose. Registrations of new passenger auto mobiles, on the other hand, receded during August reflecting the virtual com pletion of output o f 1935 models and preparations for early introduction of 1936 models, but were at the highest level for any August since 1929. (Adjusted for seasonal variations, for usual year to year growth, and where necessary for price changes) DURABLE 201 GOODS i J F M A M J J 1934 A S O N D Employment in Industries Manufacturing Durable Goods and NonDurable Goods (1923-25 average = 100 per cent) recent years. Resumption of more regular plant opera tion after shutdowns fo r inventory and repairs during July, together with more than the usual seasonal expan sion in a number of key industries such as the textile, iron and steel, machinery, and lumber groups largely accounted for the gains. Employm ent in the automobile industry, however, was reduced, owing to curtailed p ro duction prior to the introduction of new models. Gains in employment occurred in both the durable and nondurable goods groups o f m anufacturing indus tries during August. The increase over the preceding month amounted to about IV 2 per cent in the durable goods group and to nearly 4 per cent in the nondurable goods group. As the accom panying diagram indicates, however, the durable goods group registered an increase of 6 per cent compared with a year ago, whereas the number of workers employed in the nondurable goods group during the past two months was practically the same as a year earlier. In contrast to the improvement in factory employment during the month ended August 15, nonmanufacturing industries showed a small net loss in the number of workers. Decreased employment in anthracite coal min ing and in retail trade was offset only in part by gains reported in bituminous coal mining and in private build ing construction. I n d e x e s o f B u s in e s s A c t i v i t y D uring the first half of September, the distribution of goods appears to have increased slightly. A bout the usual gain occurred in the railroad movement of mer chandise and miscellaneous freight so that this bank’s seasonally adjusted index was maintained at the level prevailing since May, but an increase in all other classi fications of freight shipments, especially in the amount o f coal carried, raised bulk freight car loadings by con siderably more than the usual proportions fo r this time of year. Department store sales in the M etropolitan New Y ork area also appear to have shown a more than sea sonal upturn from the summer level. In August, changes of approxim ately the usual sea sonal magnitude predominated in data on the distribu tion of goods and general business activity. The railroad movement of merchandise and miscellaneous freight, 1935 Aug. June July 56 58 58 63 53 76 82 58 52 52 80 93 58 57 48 p 67 p 93 76 79 70 58 82 71 60 Aug. P rim a ry Distribution Car loadings, merchandise and m isc., Car loadings, oth er................................ E xp orts................................................... Im ports.................................................. Wholesale tra d e...................................... 51 51 94 Distribution to Consumer Department store sales, U. S........ Department store sales, 2nd Dist. Chain grocery sales......................... Other chain store sales................... Mail order house sales.................... Advertising........................................ New passenger car registrations. . Gasoline consum ption..................... 78 71r 66 79 67 60 49 72 General B usin ess Activity Bank debits, outside New York C it y .. . . Bank debits, New York C it y ......... .. Velocity of demand deposits, outside New York C it y ................................................... Velocity of demand deposits, New York C it y ............................................................. New life insurance sales.............................. Factory employment, United States........ Business failures........................................... Building contracts........................................ New corporations formed in N. Y . State General price level*............... Composite index of wages*. Cost of livin g *....................... p Preliminary r Revised 61 76 70 61 85 80 58 62 70 66 66 r 59 78 71 58 62 70 66 58 p 66p 46 50 63 45 55 81 44 25 59 49 56 82 42 26 60 45 55 83 p 42 29 p 59 138 182 138 144 188 139 145 186 140 14 5p 186 p 141 43 68 48 62 80 44 21 46 67 * 1913 average =100 B u ild in g The volume o f building and engineering contracts awarded in the Second Federal Reserve District was slightly larger in August than in July, due to an increase in public works projects, in this instance water front developments especially. Residential contracts showed some decline from the relatively high level of the preced ing four months, and nonresidential building also decreased. Contracts in all o f the m ajor groups were larger than a year ago, however, and the total showed an increase o f 47 per cent. F or the first 8 months of this year contracts fo r all types of building and engineer ing work in this district totaled $205,000,000, a net increase of $16,000,000 over the same period a year ago, which is more than accounted fo r by the recovery in residential building alone. Total contracts in the 37 States covered by the F. W . Dodge Corporation report showed an increase from July to August, due to heavier contracts for public works, including water fron t developments, highways, and bridges, and after adjustment of the data fo r usual seasonal changes this ban k’s index o f building contracts FEDERAL RESERVE AGENT AT NEW YO R K advanced 3 points to 29 per cent of the computed long term trend. Residential contracts declined considerably more than seasonally, however, while nonresidential building was little changed. In comparison with last year, increases were shown by each of the m ajor con struction groups. Reflecting the expansion in public works projects and the decline in residential work, the total of contracts awarded for construction under public ownership rose above the total undertaken privately, follow ing fou r months in which private construction had exceeded public construction. Data for the first half of September indicate increases o f a seasonal nature in residential and public works and utility projects, but an unseasonal recession in nonresi dential contracts. C o m m o d i t y P r ic e s Commodity prices continued to advance during most o f September, and the Bureau of Labor Statistics weekly index of all commodities for the week ended September 2 1 was at the highest point since November 1930. As in previous months, this increase reflected largely gains in agricultural com modities; the index of farm prices increased about 3 per cent from the end of August, and the wholesale food group, although showing only a slight net advance, reached the highest level since October 1930. In the nonagricultural groups, small gains in hides and leather, building materials, and textile products were largely offset by a recession in fuel and lighting materials. Other classifications, composed largely of finished goods, showed little change. Raw materials, particularly those traded on organized exchanges, showed the largest price rise during Septem ber. Reports of increased tension in the European political situation and of drought in the Argentine wheat area were followed by substantial advances in American wheat prices. A s is shown in the first section o f the accom panying diagram, the Number .1 grade of Northern wheat at Minneapolis rose during the course o f the month to the highest point since 1929, and despite a subsequent recession, the price was up 8 cents fo r the month as a w h ole; future quotations fo r wheat showed similar advances. Spot cotton prices increased some CENTS PER BU SH EL CENTS PER POUND 79 what in the first part o f September, but lost most of this gain in the last ten days of the month, and as the second part of the diagram shows the price is currently about 3 cents below the high reached in August 1934. W ith respect to the other two commodities shown in the diagram, the price o f domestic copper advanced % cent on September 16 to 9 cents a pound, follow ing an in crease o f similar amount August 19, and scrap steel at Pittsburgh rose slightly further to about the level pre vailing at the beginning o f the year. Am ong other actively traded commodities, the price of raw silk rose about 18 per cent during September to the highest level since July 1933, and spot corn prices increased 62/2 cents a bushel. The price of lead during the course of the month reached the highest level since March 1931, and zinc established a new high since Novem ber 1933. Moderate net gains also occurred in the prices of raw sugar, wool, and hides. F o r e ig n T r a d e This cou n try’s foreign trade declined slightly during August, both exports and imports of merchandise reced ing from the July levels contrary to the usual seasonal tendency. Exports, valued at $172,000,000, were approxi mately the same as a year ago, while imports of $170,000,000 were 42 per cent larger. Thus, the export balance was again greatly reduced from a year a g o ; during the first eight months o f this year exports have exceeded imports by only 2 per cent, compared with 23 per cent fo r the corresponding period o f 1934. The leading commodities entering into our foreign trade continued during August to show the same tenden cies as in other recent months. A number o f exports, especially agricultural products, showed marked declines from a year ago which offset increases in certain other items such as crude and refined petroleum products, copper, motor trucks and busses, and fertilizers. Sub stantial increases over August 1934 occurred among most of the m ajor imports. Sugar receipts, as in July, were nearly six times the tem porarily small volume o f a year ago, and wool imports increased almost three-fold. There were notable gains in purchases abroad of a number of other important crude and m anufactured products, but CENTS PER POUND Price Movements of Wheat, Cotton, Copper, and Scrap Steel DOLLARS PER TON 80 MONTHLY REVIEW, OCTOBER 1, 1935 reductions were reported in imports of copper and fertilizers. Available data on the foreign trade of the various nations fo r the first half of 1935, when com pared with the corresponding period of 1934, show considerable disparity, as the accom panying table indicates. In general, the European gold bloc countries— France, Netherlands, and Switzerland— and also Italy and Ger many, were among those showing declines compared with last year in both exports and imports. The United States, the Union of South A frica, and Russia showed declines of varying amounts in exports but increases in imports. South Am erican and F ar Eastern countries, in general, showed the largest increases in foreign trade compared with last year. In several cases increased sales o f food products and other raw materials to the United States were an important factor in the increased export trade of other countries. On the other hand, the reduc tion in exports of Am erican cotton was a factor in the smaller imports shown by some of the European countries. Percentage Change for First Six Months of 1935 from Corresponding Period of 1934f sales compared with moderate advances in July. N orth ern New Jersey stores reported the largest decline in sales in more than two years. A ugust sales o f the lead ing apparel stores in this district were substantially ahead of last year, although the advance was less than in July. Percentage change August 1935 compared with August 1934 Locality Net sales New Y o r k ...................................... B uffalo............................................ Rochester....................................... Syracuse......................................... Northern New Jersey................. B ridgeport..................................... Elsewhere....................................... Nothern New Y ork State. . . . Southern New Y ork S ta te. .. H udson River Valley District Capital D istrict........................ Westchester and Stamford. . . — 0 .3 + 5 .8 — 1.6 + 10.8 — 8 .4 + 8.2 + + + + — 2 .4 2 .5 5 .3 4 .6 0 .9 Per cent of accounts outstanding July 31 collected in August Stock on hand end of month — 2 .5 — 4 .4 — 0 .7 — 8.2 — 0 .4 + 2.6 —10.1 1934 1935 4 1 .4 43 .2 4 0 .8 2 9.7 3 5.4 3 5.8 2 3.8 — 2.6 All department stores........ 0 .7 — 2 .7 Apparel stores...................... + 9 .6 + 4.6 34.0 34.6 Imports British M alaya**........ *Japan............................. A rgentina*.................... B ra zil* ........................... United K in gd om ......... Australia..................... . C an ada.......................... United States............... Switzerland................... Union of South Africa G erm any....................... Netherlands.................. Italy................................ F rance............................ R ussia............................ * First five months. ** First four months, currencies of the respective countries. +21 +16 +12 +56 — 1 +18 + 5 +15 — 13 +18 —8 — 15 — 7 — 16 + 1 fB ased on valuations in the D e p a r tm e n t S tore T r a d e D uring the first half of September, total sales o f the reporting department stores in the M etropolitan area of New Y ork were 10.3 per cent ahead of the correspond ing period a year ago, and more than the usual seasonal expansion appears to have occurred from A ugust to September. Sales in New Y ork and B rooklyn increased 11.3 per cent over a year ago, and stores in Northern New Jersey reported an increase of 5.4 per cent, follow ing a decline in the previous month. F or the month of August, total sales of the reporting department stores in this district were 0.7 per cent be low last year, a less favorable year to year comparison than in the previous two months, but sales compared favorably with July, seasonal factors considered. The Syracuse department stores reported the largest increase in sales over a year previous since March 1934, the Hudson River V alley D istrict stores the largest rise since June 1934, and the B ridgeport department stores the largest advance in six months. On the other hand, stores in Buffalo, Northern New Y ork State, and South ern New Y ork State reported smaller increases in sales than in the previous month, and the New Y ork City, Rochester, Capital District, and W estchester and Stam ford department stores showed small declines in August W h o le s a le T r a d e D uring August, total sales o f the reporting wholesale firms in this district averaged about 5 per cent higher than last year, a smaller increase than was reported fo r July, but a larger increase than in the preceding two months. M en ’s clothing and diamond concerns showed large gains in sales over a year ago, the most substantial in several months. Sales o f silk goods, reported on a yardage basis by the National Federation o f Textiles, also showed an increase which made the most favorable comparison with a year ago since December. The drug, paper, and jew elry firms registered moderate increases which, however, were smaller than in July, and hard ware sales increased only slightly from last year. On the other hand, the decrease recorded in sales o f cotton goods was the smallest in 8 months. Grocery and shoe concerns reported sales below a year ago, follow ing substantial gains in the preceding month, and the stationery firms registered an unusually large decline. Percentage change August 1935 compared with August 1934 Per cent of accounts outstanding July 31 collected in August Com m odity Net sales M en’s clothing................................................... C otton g o o d s..................................................... Silk g o o d s........................................................... Shoes.................................................................... Stationery........................................................... D iam onds........................................................... Jew elry................................................................ Weighted average..................................... Stock end of month 1934 1935 — 1 .6 + 5 .4 + 2 2 .8 — 1.5 + 14.3* + 3 .6 * — 15.5 — 9 .7 + 7 .6 + 3 .7 + 1.0 — 10.9 + 3 .6 + 2 0 .2 + 4 9 .0 } + 5 .2 — 1 .4 9 8.4 4 7 .0 4 0 .5 5 8 .0 3 9.3 2 4.2 4 6.2 50.0 4 5.4 2 5.3 9 4 .9 55.1 4 2 .7 62.4 3 3.9 2 5.3 4 6.3 54.1 4 3.9 } 2 2 .6 + 5 .1 5 8.4 59.2 * Quantity figures reported by the National Federation of Textiles, Incorporated not included in weighted average for total wholesale trade. FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, OCTOBER 1, 1935 B u s in e s s C o n d it io n s in t h e U n i t e d S t a t e s (Summarized by the Board of Governors of the Federal Reserve System) OTAL volume of industrial production increased in August by about the usual seasonal amount. Steel output increased more than seasonally, while the output of automobiles and anthracite declined sharply. Factory employ ment and payrolls increased. Wholesale prices of farm products and metals advanced during August and the first two weeks of September, and prices of wheat and metals increased further in the third week of the month. T P ro d u c tio 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 average = 100 per cent) PER CENT Index o f Factory Employment with Adjustm ent for Seasonal Variation (1923-25 average = 100 per cent) Industrial production increased seasonally in August and the Board’s index, which is adjusted to allow for usual seasonal variations, remained un changed at 86 per cent of the 1923-1925 average. Activity at steel mills showed a considerable increase from July to August and in the first three weeks of September was at a level higher than in any other month since February. Automobile assemblies declined by about 30 per cent in August, and showed a further sharp reduction in the early part of September, reflect ing in part preparations for early introduction of new models. At lumber mills output continued to increase in August. Cotton consumption by domestic mills increased slightly from recent relatively low levels and activity at woolen mills was maintained at a high rate. At mines, output of anthracite decreased sharply in August, while output of bituminous coal showed an increase. Fac tory employment and payrolls increased between the middle of July and the middle of August by more than the usual seasonal amount. Marked increases in employment were reported for the steel, machinery, lumber, silk, and cloth ing industries, while at automobile factories employment declined somewhat. The number of wage earners engaged in the production of durable manufac tures in August was 6 per cent larger than a year earlier, while the volume of employment in other manufacturing industries as a group showed little change. Total factory employment was 3 per cent larger than in August 1934. Daily average value of construction contracts, as reported by the F. W. Dodge Corporation, showed little change in August and the first half of September. Contracts for residential building, which earlier in the year had increased considerably, showed a decrease for this period, while the volume of public projects increased. Department of Agriculture estimates based on September 1 conditions indicate a cotton crop of 11,489,000 bales, as compared with the unusually small crop of 9,636,000 bales last year. The indicated crops of corn, wheat, and other grains are considerably larger than last year, when drought condi tions prevailed, and the condition of pastures is above the ten year average. D is t r ib u t io n Freight car loadings increased considerably in August and the first half of September, partly as a consequence of seasonal factors. Department store sales increased slightly less than seasonally from July to August. C o m m o d it y P r ic e s 1 929 1 930 1931 1 93 2 1933 1 93 4 1 93 5 Group Price Indexes o f the Bureau o f Labor Statistics (1926 average = 100 per cent) BILLIONS OF DOLLARS The general level of wholesale commodity prices, as measured by the index of the Bureau of Labor Statistics, advanced from 79.6 per cent of the 1926 average at the beginning of August to 80.8 per cent in the second week of September and prices of many leading commodities, including wheat, silk, copper, lead, and zinc advanced further in the third week of the month. Cotton prices declined considerably in August and showed relatively little change in the first three weeks of September. 6r B a n k C r e d it I U S . S E C U l R IT IE S J i J \ ....... H * A L L O T H IE R 1 HAMC i LOANS O T IH E R 1 ON S E C U R IT IE S — S E C U R IT IE S 1 l 1 1 I l 1 I i i Wednesday Figures for Reporting Member Banks (Latest figures are for September 18) Excess reserves of member banks declined in the five week period ended September 18, reflecting a temporary increase in the Treasury’s total holdings of cash and deposits at Federal Reserve Banks and a seasonal increase of money in circulation, which was partly offset by an inflow of gold from abroad. Total loans and invesetments of reporting banks in leading cities in creased by $610,000,000 during the five weeks ended September 18. Loans increased by $100,000,000, holdings of United States Government direct obli gations by $390,000,000, holdings of United States guaranteed securities by $70,000,000, and holdings of other securities by $50,000,000. Adjusted demand deposits of these banks— that is, demand deposits other than Government and bank deposits, adjusted for collection items— increased by $140,000,000, United States Government deposits by $160,000,000, and balances due to banks by $270,000,000. Yields on Government securities rose somewhat further during this period, while other short term open market money rates remained at previous low levels.
@FedFRASER