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M ONTHLY

R E V IE W

of Credit and Business Conditions
Second Federal Reserve District

October1,1941

FederalReserveBank, NewYork
M on ey

M a r k e t in S e p te m b e r

Throughoutthemonthof September, themoneymar­
ketwasinfluencedtosomeextentbytheprospect of an
increaseinrequiredreserves of member banks. When
the increase inreserve requirements was actually an­
nounced, however, it appearedthat theactionhadbeen
ratherfullydiscounted, at least forthepresent.
Theannouncement of thechangeinreserverequire­
ments, whichwas madepubliconSeptember 24, stated
thattheBoardof GovernorsoftheFederal ReserveSys­
tem,afterconsultationwiththeSecretaryof theTreas­
ury, had increased reserve requirements for member
bankstothepresentstatutorylimit, effectiveNovember1,
asafurtherstepintheGovernment’sprogramforcom­
batinginflation. Beginning onNovember 1, 1941, the
newrequirementswillbeinaccordwiththepercentages
specifiedinthefollowingtable,whichcomparesthemwith
thereservepercentagesnowinforce.
(Per cent of deposits)

Classes of deposits and banks

Present
New
requirements requirements

On net demand deposits:
Central Reserve City banks..........................................
Reserve City banks.........................................................
“ Country” banks.............................................................
On time deposits:
All member banks...........................................................

22 %
17 H
12
5

*26
20
14
6

Onthebasisofthepresentfigureofabout$5,200,000,000ofexcessreservesheldbyallmemberbanks, andtheir
present distribution, it isestimatedthat theincreasein
requiredreserves, whichamountstoabout oneseventh,
wouldresultinadeclineof about $1,200,000,000inex­
cessreserves. Theresultingdeclineinexcessreserves, to
about $4,000,000,000, would, as the accompanying dia­
gramindicates, leaveexcessreservesconsiderablyhigher
thantheywereimmediatelyafterthereservepercentage
adjustmenteffectiveApril 16, 1938, notwithstandingthe
fact thattheNovember1increasecancelsthereduction
whichoccurredonthat date. Thehigherlevel of excess
reserves, despitethehigherpercentages of requiredre­
serves, istobeexplainedprincipallybythelargeinflow
of goldsince1938 (causingagreat increaseinmember
bankreservebalances), whichforthewholeperiodhas
beenonlypartlyoffsetbyalargeincreaseinmoneyin
circulationsincethat time, andbygrowthof member




bankreserve requirements accompanyingexpansionof
deposits. Sincethebeginningof 1941, however, thegold
inflowhasbeenretarded, and, asaresultof increasesin
moneyincirculation,memberbankreserverequirements,
and Treasury holdings of cash and deposits in the
ReserveBanks, excess reserves haveshownadeclining
tendencyduringthepastninemonths.
TheNovember1increaseinrequirements, if applied
tothepresent level anddistributionof excessreserves,
wouldreduceCentral ReserveCitybankexcessreserves
fromapproximately$2,400,000,000to$1,700,000,000, the
excess of New York City banks declining from
$1,800,000,000 to about $1,300,000,000, without taking
intoaccountpossiblewithdrawalsoffundsbyout-of-town
banks. At ReserveCitybanks, excessreserveswouldde­
cline from $1,850,000,000 to $1,500,000,000, and at
countrybanksfromnearly$1,000,000,000to$800,000,000.
Thus theNovember 1increaseinreserve requirements
will, as the Board of Governors’ statement indicates,
“leavethebanks as awholewithamplefunds tomeet
allcreditneedsofthedefenseprogramandalllegitimate
requirements of their customers.” A survey made re­
centlybytheBoardof Governors showedthat alarge
majorityof thememberbankswill beabletomeet the
increasedrequirements out of existing excess reserves
andall but afewof theremainderbydrawingupona
portion of their deposits with city correspondents.
BILLIONS
OF DOLLARS

R eserve Position of AH M em ber B a n k s, Sh ow in g Required R eserves
and E x cess R eserves to D ate, and E stim ated R equired R eserves
after Increase in R eserve P ercentages E ffective N ovem b e r
1, 1 9 4 1 , B ased on P resen t A m o u n t o f R equirem ents

74

MONTHLY REVIEW, OCTOBER 1, 1941

Furthermore, theBoardhasannouncedthatpenaltiesfor
deficient reserves, prior to December 1, 1941, will be
baseduponreserve requirements ineffect October 31,
1941.
Theincreaseinmemberbankreserverequirementsand
thecontrol of consumer credit, whichbecameeffective
September1, bothconstitutesteps, inthemonetaryand
bankingfield,aimedatsupplementingothermeasuresin
theover-all programof combatinginflationarydevelop­
ments. Theseotheranti-inflationarymeasuresincludethe
programoffinancingasmuchaspossibleoftheGovern­
ment deficit bysales of Savings Bonds toindividuals,
therebylimitingtheexpansionof depositswhichis in­
volved in commercial bank purchases of Government
securities, theinstitutingof muchheavier taxes onin­
dividuals (both directly and indirectly) and oncor­
porations, andtheextensionof priorities, allocationsof
materials, andpriceregulation. Theincreaseinreserve
requirements tobe effective November 1 exhausts the
existingstatutorypoweroftheBoardof Governorsover
reserverequirements, andtheSecretaryof theTreasury
andthe Chairmanof the Board of Governors jointly
statedonSeptember 23 that “recommendations onthe
questionof what additional powers, if any, over bank
reservestheBoardshouldhaveduringthepresentemer­
gencyandwhat formthesepowers shouldtakewill be
madewhenevertheTreasuryandtheBoard,afterfurther
consultation, determinethat suchactionis necessaryto
helpincombatinginflationarydevelopments.’9

seventrading sessions of the month, but expectations
that actiontoraisereserverequirement percentagesfor
memberbankswouldbetakenseemtohavehadadamp­
eningeffectonpricesofTreasurybonds, particularlythe
intermediatetermissues, betweenSeptember10and23.
However, on September 24, following the actual an­
nouncement of higher reserve requirements, Treasury
bondquotations movedupmorethan*4 point, onthe
average. Firmness was also in evidence later in the
month, andthe groundlost inmid-September was re­
gained.
As indicated by the movement of yields, prices of
Treasurynotesdippedtotheirlowpoint forthemonth
onthe 23rdbut recoveredsubsequentlyto showlittle
changeforSeptember. Theyieldonthe%percenttax
exemptnotesdueMarch15, 1945, afterfluctuatingonly
slightlyinthefirsthalf of themonth, movedfrom0.34
percentonthe16thto0.40percentonthe23rd. Bythe
endof themonththeyieldhadsettledbackto0.37per
cent. Theyieldonthe % per cent taxable notes, due
December15,1945, tracedasimilarpattern.
Acceptedbidsonthefourweeklyissuesof taxable91
dayTreasurybills duringSeptemberweretenderedon
interestbasesdecliningfrom0.090percentfortheissue
datedSeptember3to0.037percent (thelowestratesince
last February) fortheissuedatedSeptember24. Each
oftheissueswasintheamountof$100,000,000; thefirst
threereplacedmaturingissuesof$200,000,000each.
Money Rates in New York

M ember B a n k Credit

Commercial, industrial, and agricultural loans of
weekly reporting member banks in leading cities ex­
panded$206,000,000 further inthe four weeks ended
September 24, andas some other types of loans also
increased, total loans of the reporting banks rose
$257,000,000. Total investment holdings of the banks,
however, declined $244,000,000, owing to a drop of
$265,000,000 inthe banks7holdings of Treasury bills
whichaccompaniedareductionof $300,000,000 inthe
outstandingvolumeof suchsecuritiesduringtheperiod
underreview. As anet result of theriseinloansand
reductioninsecurityholdings, thetotalvolumeofreport­
ingmemberbankcredit outstandingwaslittlechanged
forthefourweeksendedSeptember24.
Adjusted demand deposits of the reporting banks
showednomaterial netchangeforthefourweeksended
September24, andonSeptember 24were$154,000,000
belowthepeakreachedinthelatterpartofJuly. Domes­
ticinterbankdeposits rosesharply, reflectinginpart a
movementofbankingfundstoNewYork. UnitedStates
GovernmentdepositscontinuedtorisethroughSeptember
24, astheresultofthecreditingofsomeoftheproceeds
of sales of Defense Savings Bonds and Treasury tax
seriesnotes, butonSeptember25therewasasubstantial
withdrawal by the TreasuryfromGovernment deposi­
tariesofproceedsoftheDefenseSavingsBondssales.
G overnment Securities

DuringthegreaterpartofSeptembertheGovernment
securitymarketwasquiet, andtherewaslittlenetchange
inpricesforthemonthasawhole. Bothtaxexemptand
taxableTreasurybondsfluctuatednarrowlyinthefirst




Sept. 30, 1940 Aug. 30, 1941 Sept. 30, 1941
Stock Exchange call loans.......................
Stock Exchange 90 day loans.................
Prime commercial paper— 4 to 6 months
Bills— 90 day unindorsed.........................
Average yield on Treasury notes (3-5
Average yield on Treasury bonds (not
callable within 12 years) t .....................
Average rate on latest Treasury bill
sale, 91 day issue...................................
Federal Reserve Bank of New York
discount rate..........................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed bills. .

1
*1H
%>

x

1
y2

h

a

1
*1 H
X
A

0.45

0.31

2.20

1.96

1.97

0.013

0.114

0.037

1

1

1

Vl

X

0.36J

X

* Nominal.
f “ Tax exempt” issues only.
t Change of + 0 .0 3 per cent from previous yields due to dropping from the average
the 1 per cent Treasury note issue of September 15, 1944, which matures within
three years.

G o ld

M o v e m e n ts

ImportsofgoldintotheUnitedStatesduringSeptem­
berwereinsomewhatlargervolume, butthenetincrease
inthegoldstockofabout$40,000,000wasapproximately
thesameas inthethreeprecedingmonths. Goldheld
under earmark for foreign account at the Federal
Reserve Banks increasedabout $47,000,000 during the
monthtoapproximately$2,023,000,000.
InthefiveweeksendedSeptember24, theDepartment
of Commercereportedthereceiptof $60,000,000of gold
inthe following principal amounts: $38,600,000 from
Canada, $5,700,000 fromRussia, $4,200,000 fromthe
Philippines, $2,500,000fromColombia, $2,100,000from
Australia, $1,600,000fromPeru, $1,400,000fromChile,
$900,000fromMexico, and$700,000fromNicaragua.

FEDERAL RESERVE BANK OF NEW YORK
M e m b e r s h i p in t h e F e d e r a l R e s e r v e S y s t e m

During September two additional State chartered
banksandonemoretrustcompanyintheSecondFederal
ReserveDistrictbecamemembersoftheFederal Reserve
System,therebyincreasingtothirty-fourthenumberof
institutions whichhavebecomemembers sincethefirst
of thisyear. Excludingsavingsbanks, industrial banks,
andprivatebanksintheSecondFederalReserveDistrict,
noneof whicharenowmembersof theFederal Reserve
System, although savings banks and industrial banks
may under certain conditions become members, the
present membership situation in this District, with
respecttonumbersof memberandnonmemberbanks, is
asfollows:
Member

Nonmember

Total

National banks..........................................
State banks and trust companies..........

583
211

0
196

583
407

Total....................................................

794

196

990

75

influenceof adversenews fromtheEasternFront and
theTreasuryproposal tolimit corporationprofits to 6
percentofinvestedcapital, andthe90stockaverageby
September26hadrecededtotheSeptember10level. At
theendofthemonththepriceaveragewasslightlylower
thanatthebeginningandwas6percentbelowtheyear’s
high. IndustrialsharesmadeastrongershowinginSep­
temberthaneitherrailorutilitystocks. Tradingactivity
ontheNewYorkStockExchangefor themonthas a
wholecontinuedtoberestricted,althoughononeday,the
25th,volumewastheheaviestsinceJuly22.
Pricesof highest gradecorporatebonds, asmeasured
byMoody’sindexofAaabonds, wereoffsomewhatinthe
firsthalf of themonthbut subsequentlyrecoveredmost
of thisdecline. Meanwhile, mediumgradebonds, rated
BaabyMoody, showedanirregulardeclineof about %
of apoint during September. Most of this downward
movement wasaccountedfor bycontinuedweaknessin
second-grade rail bonds, whichmay perhaps be asso­
ciatedwithdevelopmentsintherailroadwagesituation.
AccordingtoStandard’spriceaverage, primemunicipal
bondsweresteadyatlevelsslightlybelowtherecordhigh
setAugust 6, last. Sharprisesinquotationsof foreign
dollarbondswerereportedforthefirsthalfofSeptember.
The largest gains were in bonds of German-occupied
countriesandinJapanesebonds.

Thus, of the‘*commercial’’ banksinthis District, 80
percentofthenumberarenowmembersof theFederal
ReserveSystem;membershipofallNationalbanksinthe
continental United States exclusive of Alaska is re­
quiredby the Federal Reserve Act while State banks
andtrust companies may become members, subject to
theirmeetingcertainconditions of membership, andin
this latter groupnearly52 per cent of thenumber of Theawardtoagroupof lifeinsurancecompaniesof
such institutions in this District are nowmembers, $90,000,000 American Telephone andTelegraphCom­
accountingforapproximately87percentoftheassetsof panyrefundingdebenturesonSeptember 29raisedthe
all State banks and trust companies in the District. volume of corporate and municipal financing during
eptemberto$201,000,000. Withoutthisissuethemonth’s
Fromthe standpoint of total commercial bankassets, S
total wouldhavebeenthesmallest inmorethanthree
bankswhicharemembersoftheFederalReserveSystem y
ears. Corporateflotationsamountedto$158,000,000, of
accountforapproximately92percentoftheassetsofall w
hichonly$26,000,000represented“newmoney”. The
commercialbanksinthisDistrict.
v
o
meofmunicipalfinancingcontinuedtodecline, asit
The movement toward membership in the Federal halu
s
r thelast several months, andapproximatedthe
ReserveSystemhasalsobeeninprogressinotherFederal lowefo
s
t
vels reached since September, 1939, the first
ReserveDistricts, andfor thefirst eight monthsof the monthole
fthewar.
yearthenumberofbanksbecomingmembersaggregated Detailsofthemajorflotationsareasfollows:
123. Therewere39 admissionsof newmembers inthe
Telephone and Telegraph Company 2%
ChicagoFederal ReserveDistrict, inwhichthenumber $90,000,000 American
per cent debentures maturing in 1976, awarded at
of nonmember commercial banks withsufficient capital
101.842 (or a net interest cost of about 2.66 per
cent) ; for refunding purposes
stocktomeet theminimumstatutoryrequirements for
Railroad Company 3% per cent first mortgage
FederalReservemembershipisbyfarthelargestof any 18,000,000 Eriebonds
of 1971, awarded at a net interest cost o f
Federal ReserveDistrict. TheNewYorkReserve Dis­
3.19 per cent and reoffered at 10 2^ (yield o f
tricthad31admissionsduringthesameperiod, andfor
3.125 per cent) for principal amounts up to
$499,000 and at 101% (yield o f 3.15 per cent) for
the other districts the number of banks that became
amounts o f $500,000 and upward; for refunding
membersvariedfrom1to12.
purposes
N ew

S e c u r ity

M a rk e ts

StockpricesfluctuatedirregularlyduringSeptember.
Noneofthepricemovementswaseitheroflongduration
or of great extent. BetweenSeptember 2 and10 the
Standard90 stockprice average declinedabout 2per
cent, thenrecovered3percent inthenext sixtrading
sessions. Anotherperiodof declinefollowed, underthe




F in a n c in g

14,700,000 Saint Paul Union Depot Company first and refund­
ing mortgage 3% per cent bonds o f 1971, awarded
at a net interest cost o f 3.06 per cent and re­
offered at 102% to yield 3.00 per cent; for re­
funding purposes
9,000,000 State Roads Commission of Maryland 1% to 2%
per cent refunding bonds maturing from .1942 to
1956, awarded at a net interest cost o f 1.85 per
cent and reoffered to yield from 0.30 to 2.00 per
cent; for refunding purposes.

76

MONTHLY REVIEW, OCTOBER 1, 1941

September, when the unofficial discount narrowed to
10y4per cent, thesmallest sinceNovember, 1939. The
discount subsequently widened, however, to 11% per
cent onSeptember 23, as the seasonal tourist demand
slackened; at theendof themonthit stoodat 11%per
cent, asagainst 10%percent amonthearlier. Among
the Latin American exchanges, the free rate for the
Argentinepesocontinuedtoholdaround$0.2380until
mid-September, whensome reaction developedandby
theendofthemonththeratehadrecededto$0.2343, the
lowestsincelastApril. Thisreactionmayhavebeendue,
inpartatleast, toadeclineinthebuyingofpesos, under
licensehere, tobeusedforthepurchaseinArgentinaof
ItalianliretocoverremittancestoItaly. Somedemand
fordollarsintheArgentinefreemarket, inanticipation
of the payment of third quarter profits onAmerican
direct investments inArgentinamay alsohavebeena
factorinthereactioninthepesoduringthelatterpart
of September. After holding at about $0.2750 during
Temporaryfinancingtotaledanadditional$80,000,000 mostofthemonth,thefreeratefortheVenezuelanboli­
andincluded$35,000,000NewYorkCity0.25 percent vardeclinedto$0.2685onSeptember 26but endedthe
revenuebillsmaturingNovember5,1941, and$29,000,000 month at $0.2700. The favorable outlook for Cuban
Federal Intermediate Credit Bank% per cent consoli­ sugar exports, accompanying the recent increase in
dateddebenturesmaturingJuly1, 1942whichweresold Americanimport quotas for Cubansugar, appears to
belargelyresponsibleforsomefurtherimprovement in
onaninterestbasisof0.40percent.
theCubanpesoearlyinthismonth, whenthediscount
Accordingtopublicannouncements, anumberof cor­ narrowedfrom% per cent to about % per cent, the
porations areplanningtoissue securities toraisenew smallest in several years.
capital, but onlyinafewcasesaresubstantial amounts
theFarEast, themostsignificantforeignexchange
involved. The DowChemical Companyhas offeredits deIvn
elopmentwastheactiontakenbytheprincipal nonstockholders of recordSeptember26, 113,519 shares of Axis
anksinShanghaiwhichhadtheeffectofvirtually
commonstockthroughtransferablesubscriptionwarrants suspeb
n
ding all unrestricted trading in the Shanghai
expiringOctober6, andtheWestinghouseElectricand open m
ket. It was reported on September 8 that
Manufacturing Company will offer 534,426 shares of branchesarin
hinaof theAmerican, British, Dutch, and
commonstocktoits stockholders of recordOctober 15, Chinese banC
k
to whomgeneral licenses have been
throughrights whichwill expire onOctober 28. The grantedunders,ou
rfreezingregulations, hadagreedto
UnionPacificRailroadhasrequestedthat bidsbesub­ cooperate fully w
ith the newly created Stabilization
mittedonOctober8foranissueof$13,250,000of equip­ BoardofChina.Inlin
ewiththispolicy,theChineseyuan
menttrustcertificates.
isnowquotedinShanghai at 511/32 centsand33/16
Asindicatedintheaccompanyingdiagram,corporate pence, thesameas the rates fixedbythe Stabilization
financingaveragedabout $230,000,000 amonthduring Boardforcoverforlegitimatemerchandiseimportsfrom
thethirdquarterof thisyear. Thevolumeof corporate theUnitedStatesandthesterlingarea. OnSeptember
refundingsdeclinedtoalowlevel, but the$132,000,000 24theNewYorkmarket was advisedthat theReserve
monthlyaveragefornewcapital flotationsexceededthat Bankof Indiahadchangedits buyingratefor dollars
ofanyquartersincethesecondquarterof 1937. Chiefly fromtheequivalent of about $0.3030 per rupee, which
responsible for this rise inthevolume of newcapital hadbeenineffect since April 2, tothe equivalent of
financing was the flotationinAugust of $222,000,000 about $0.3035. The Reserve Bank’s selling rate for
American Telephone and Telegraph Company deben­ dollars for spot delivery was also changed to the
tures.
equivalent of about $0.3010; sinceMay, 1940this rate
hasbeen$0.3003.
MILLIONS
OF DOLLARS
4 0 0 ----------

M on th ly A v era g e V olu m e of D om estic Corporate Security Issu es for
R efund in g and for N ew Capital (In m illions of d o llars;
third quarter 1941 data prelim inary)

F o r e ig n E x c h a n g e s

During the past month interest in the NewYork
marketforforeignexchangecontinuedtobecenteredin
the Western Hemisphere currencies. The Canadian
dollar, which had been in demand in the unofficial
marketinrecentmonths, improvedfurtherduringearly




C o m m o d it y P r ic e s

Advancing prices again predominated in wholesale
commoditymarkets during September, although, as in
August, therateofrisewaslessrapidthaninthespring
andearlysummer. Hearings onthe price control bill

FEDERAL RESERVE BANK OF NEW YORK

wereresumedaboutthemiddleofthemonthandavariety
ofproposalswasofferedforcheckinggeneralpriceinfla­
tion. TheSecretaryof theTreasuryrecommendedthat
part of thelargeGovernment holdingsof suchagricul­
tural commoditiesascotton, wheat, andcorn, besoldto
haltpriceadvances. ThePriceAdministratoradvocated
aselectivesystemof pricefixing, limitingtheestablish­
mentof priceceilingsto“75to100principal commodi­
tiesorfabricatedproductsofindustry.”
InthelatterpartofSeptembersomereactionoccurred
inthepricesofanumberof commoditiesnotunderceil­
ingregulations, especiallyfarmandfoodproducts. Large
price gains recordedearlyinthemonthincottonand
hogsweremoreorlessoffsetbysubsequent declines, al­
thoughwheatquotationsshowednetgainsofaroundfive
centsforthemonth. Pricesof industrial rawmaterials,
over whichceiling quotations have beenwidely estab­
lished, movedwithinnarrowrangesbut towardslightly
higher levels. During September the Office of Price
Administrationissuedschedulesof maximumpricesfor
severaladditionalproducts, includingDouglasfirlumber,
twotypesofcoke,wastepaper, andethylalcohol, thereby
increasingtoover30thetotal numberof priceceilings
effectiveas of October 1. Therewerealsorevisions in
certain ceiling regulations, among which was the an­
nouncementofaplanwherebycottontextilepriceswould
bechangedindirectrelationshiptotheaveragepriceof
rawcottonin10Southernmarkets.
AccordingtotheBureauof Labor Statistics weekly
index, wholesalecommodityprices generallyhaverisen
22percent sincetheoutbreakof thewar, and18per
cent withinthe last year. While all major categories
of commodities have shownsome price advances over
these periods, the degree of participation inthe gen­
eral risehasvariedgreatly, astheaccompanyingtable
indicates. IncreasesfromAugust 26, 1939toSeptember
20, 1941rangedfrom6percent for metals andmetal
productsto49percent forfarmproducts. Differences
intheextent of priceadvancereflect, ontheonehand,
earlyandeffectivemeasurestorestrainpricesof metals
andothercommoditiesof critical importancetothede-

fenseprogram. Ontheotherhand, several factorshave
operatedtoincreasefarmandfoodprices; amongthese
areexpandingconsumerdemandandthepassageinMay
of legislationrequiringtheCommodityCredit Corpora­
tiontomakeloansonmajor1941cropsat85percentof
parityprices. Advancesinpricesofimportedfoodshave
beenduelargelytoatighteningshippingsituation.
E m p lo y m e n t a n d P a y r o lls

Employment inNewYorkStatefactories rose4per
cent furtherinAugust, andpayrolls increased6%per
cent. Thesegainswereduenot onlytocontinuedlargescale hiring at plants withdefense orders but also to
expansion of working forces at firms manufacturing
civilian goods. Women’s clothing and millinery con­
cerns madelarge seasonal additions toworkingforces,
andmen’sclothingfirmscontinuedtooperateat ahigh
level. All branchesof themetals andmachineryindus­
trialgroupemployedmoreworkersinAugust; shipyards
andplants producingairplanes, firearms, andtool steel
reported the largest gains. This bank’s seasonally
adjustedindexes of employment andpayrolls inNew
YorkStatefactories, whicharebasedondatareported
by the State Department of Labor, continued their
steadyrise,asisshownbytheaccompanyingdiagram;by
August bothindexes hadadvancedfor 16 consecutive
months. Factoryemploymenthasrisen42percentsince
August, 1939, justpriortotheoutbreakofwar, whereas
theincreaseinpayrollsoverthetwoyearperiodhasbeen
85percentorapproximatelytwiceasmuch,owingtothe
combinationoflargerworkingforces, higherwagerates,
andlongerworkinghours. Bothindexesarenowatthe
highestlevelsonrecord;theemploymentindexinAugust
was26%percentabovethe1929peak, andtheindexof
payrollswas36percenthigher.
FactoriesintheUnitedStatesasawholereportedin­
creasesof 1y2 percentinworkingforcesand3percent

United States Bureau of Labor^Statistics
Weekly Indexes of Wholesale Commodity Prices
Index
Percentage change Sept. 20,
September
1941 compared with
20, 1941
(1926=100)
Sept. 21, 1940 Aug. 26, 1939
Farm products............................................
Foods........................................................
Textile products.........................................
Hides and leather products.....................
Building materials.....................................
Chemicals and allied products...............
Housefurnishing goods..............................
Fuel and lighting materials.....................
Metals and metal products.....................
Miscellaneous.............................................

91.2
88.5
89.2
111.7
106.2
87.8
98.0
80.0
98.7
85.0

+ 3 8 .8
+ 2 4 .4
+ 2 3 .9
+ 1 2 .8
+ 1 1 .6
+ 1 4 .3
+ 8.9
+ 1 1 .3
+ 3.6
+ 1 1 .4

+ 4 9 .3
+ 3 2 .7
+ 3 2 .3
+ 2 0 .6
+ 1 8 .4
+ 1 8 .3
+ 1 2 .6
+ 9 .3
+ 5.6
+ 1 6 .3

All commodities.....................................

91.5

+ 1 7 .8

+ 2 2 .3

Raw materials............................................
Semimanufactured articles......................
Manufactured products...........................

89.8
90.1
92.8

+ 2 8 .1
+ 1 6 .3
+ 1 3 .6

+ 3 5 .6
+ 2 1 .1
+ 1 7 .0




77

Factory Employment and Payrolls in New Y ork State, Adjusted
for Seasonal Variation and to Census Data
(1925-27 a v e r a g e s 100 per cent)

78

MONTHLY REVIEW, OCTOBER 1, 1941

inwagepaymentsbetweenJulyandAugust. Inneither
case were the gains so large as those experienced in DuringAugusttheindexofproductionandtradecom­
ordinaryyears, because of the exceptionally highrate putedat this bankrosetwopoints further to 113 per
towhichindustrial activityhadalreadyrisenbyJuly. cent of estimatedlongtermtrend—withinstrikingdis­
Therewerefurtheremploymentincreasesintheaircraft, tanceof thehighest level reachedin1929. Inthetwo
machine tool, andelectrical machinery industries, but y
earperiodfromAugust, 1939 (themonthjust preced­
shipyards reported amuchsmaller gainthaninpre­ in
gtheoutbreakof thewar) toAugust of thisyearthe
cedingmonthsowingtoalabordisputeatanEast coast ind
exadvanced27points.
yard. Automobile factories laid off large numbers of T
eriseinthegeneral indexinAugust reflectedpri­
workersduringAugustinconnectionwithmodelchange- marh
ily
arp(andprobablylargelytemporary) spurt
overs, whileradiomaufacturersincreasedworkingforces inretailatsrh
a
mthealreadyhighlevel of July. As
seasonally. Canneries, whose business has beenstimu­ indicatedbydethferoa
companyingchart, thegroupindex
latedbylargeGovernment purchases, addedevenmore measuringdistributcio
ntoconsumeradvancedninepoints
workersthanusual inAugust. Factoryemployment as over July. Departme
t store sales increasedconsider­
awholewas23percentabovethelevel of August, 1940 ablymorethanusual n
i
n
Augustandwereaboutathird
andpayrollswere49percentgreater.
larger thaninthe corresponding month of last year.
Total civil nonagricultural employment intheUnited Combinedsalesof thetwomajormail orderhousesran
States is estimatedby the Labor Department to have nearly50percent aheadof August, 1940, andsalesof
risen 260,000 in August to a total of approximately variety andgrocery chainsystems were about 25 per
39,500,000persons. Alargepartoftheincreaseoccurred centgreater. Althoughretailsalesofnewpassengercars
inmanufacturing industries, but wholesale andretail weresomewhathigherthaninthepreviousAugust, there
trade establishments andconstructionfirms also made wasasharpdeclinefromJuly, owingtochangeoverto
sizable additions to working forces. Compared with newmodels.
Augustayearago,3,600,000morepersonswereemployed Reflectingthecontinuedimpetus of thedefensepro­
innonagricultural occupations. Thearmedforces (not gram,outputof producers’ durablegoodsadvancedinto
included in the above estimates) totaled 1,950,000 in newhighgroundinAugust;theaircraft, machinery, and
August, anincreaseof 1,400,000overAugust, 1940.
other‘‘defense’’ industriesshowedfurthergains, andthe
steelmillscontinuedtooperateatnearcapacity. Onthe
otherhand, output of producers’ nondurablegoodsand
o
consumers’ durablegoodsdeclinedbetweenJulyand
Preliminarydatafor Septemberindicateacontinua­ Afug
st, seasonalfactorsconsidered.Productionofcotton
tionof the highrate of business activity. Despite in­ andu
wooltextileswassomewhatlowerthaninthepreced­
creasingconcernover actual andprospective shortages ingm
onthanddeliveriesofsilktodomesticmillsfell off
ofsteelscrap,thesteelmillscontinuedtooperatecloseto toonly
t onetenthof theJulyratefollowingthe
full ratedcapacity in September. Production of new zingaobfou
silkstocksbytheOfficeof ProductionMan­
model automobilesrosesteadilyinSeptember, following fargeeem
nt earlyinthemonth. Passengercaroutput was
thechangeoverperiodinAugust, but, owingtoGovern­ sharpely
educedinconnectionwiththe changeover to
ment restrictions ontheoutput of passengercars, total productiorn
of newmodels, andoperationsinthefurniassemblies wereconsiderablylower thaninSeptember,
1940. TheOfficeof ProductionManagement announced
that December production of passenger cars has been
setat48%percentlessthanoutputinDecember, 1940.
Thisquota,togetherwiththe26%percentcutpreviously
orderedfortheAugust-Novemberperiod, will result in
anover-all curtailment for thefirst fivemonths of the
1942 model year of 32 per cent. Production of light
trucks for nonmilitarypurposes for theperiodAugust
throughNovemberhasbeenlimitedto91percentof the
outputinthecorrespondingmonthsoflastyear.
Cottontextilemills arereportedtohavemaintained
operations at anextremelyhighrateinSeptember, al­
thoughthevolumeofsalesofgraygoodswassmall, owing
totheunwillingness of mills tobookadditional orders
anduncertaintiesoverpriceceilings. Aroundthemiddle
of the monthloadings of railway freight reachedthe
highest weeklytotal sincethefall of 1930, andelectric
powerproductionandoutputof crudepetroleumroseto
newrecordlevels.
P r o d u c t io n a n d T r a d e in A u g u s t

P r o d u c tio n a n d T r a d e




1927 1928 1929 1930 1931 1932 1933 1 93 4 1935 193 6 1937 1938 1939 1 9 4 0 1941

Index o f D istribu tion to C onsum er (F ed eral R eserve B ank o f N ew
Y o rk index, expressed as a percentage o f estim ated long term
trend, and ad ju sted for seasonal variation )

FEDERAL RESERVE BANK OF NEW YORK

79

ture industry increasedless thanusual over the rela­ Although almost all classifications have shown in­
creasesinvolumeduringthepast year, therehas been
tivelyhighJulylevel.
ashift inthe relative importance of various types of
constructionworkowingtothenatureofdefenserequire­
ments. Forexample, awardsforresidentialbuildingand
public works projects haveaccountedfor smaller per­
centagesofallcontractsawardedsofarthisyearthanin
thecorrespondingperiodof1940. Ontheotherhand,the
proportionsofallcontractswhichhavebeenawardedfor
utilities construction (particularly electric power and
lightprojectsandairports) andfornonresidentialbuildinghaveshownincreases.
Withinthenonresidentialbuildinggroup,widechanges
intherelativeimportanceof various types of building
haveoccurred, as isshownintheaccompanyingchart.
While the dollar value of awards for public purpose
building showedlittle net change betweenthe first 8
monthsof1940andthecomparableperiodof1941, other
nonresidential buildingawards werealmost four times
aslarge. FromJanuarythroughAugust of 1940public
purposebuildingaccountedfor thelargest singleshare
of nonresidential building (39 per cent); commercial
andmanufacturingbuilding eachamountedtoalittle
under onethirdof the grouptotal. Inthefirst eight
monthsofthisyear, however, awardsforpublicpurpose
andcommercial buildinghaveeachrepresentedonlyone
fifthof all nonresidential buildingcontracts, whilefac­
toryconstruction (nearlyhalf of whichwas accounted
for by Government contracts) has made up approxi­
mately 50 per cent of the total. Government defense
awardsprimarilyaccountfortheincreaseinthemiscel­
laneousclassificationfrom4to10percent of thetotal.
Asaresultof theheavydemandonbuildingsupplies,
causedbythedefenseprogram,anordergrantingpriori­
tiesoncriticalmaterialsforcertaintypesofprivateresi­
dential building indefense areas andfor Government
housingprojects for workers indefenseindustries was
(Adjusted for seasonal variations and estimated long term trend;
series reported in dollars are also adjusted for price changes)
1941

1940

August

June

July

August

Index of Production and Trade.......................
Production of:
Producers’ durable goods.......................
Producers’ nondurable goods.................

93

110

lllp

113p

93r
97r

123
121

126p
121p

131p
117p

Consumers’ durable goods.....................
Consumers’ nondurable goods...............

73
94

104
105

103p
105p

96p
104p

Primary distribution....................................
Distribution to consumer...........................

90
98r

104
104

105p
107p

105p
ll6p

Industrial Production
Steel.................................................................
Automobiles...................................................
Bituminous coal............................................
Crude petroleum...........................................
Electric power...............................................
Cotton consumption....................................
Wool consumptionr....................................
Shoes...............................................................
Meat packing................................................
Tobacco products.........................................

112
56
96r
86
100
lllr
109
lOlr
97
89

126r
131
125
87
113
149r
196
133
105
99

126r
150
130
86
112
155r
179
133p
106
96

125
104
ll7 p
90p
115p
152
I64p
119p
110
97

Manufacturing Employment
Employment..................................................
Man-hours of employment.........................

97r
93r

116
119

120
122

119p
121p

Construction
Residential building contracts...................
Nonresidential building and engineering
contracts.....................................................

60

67

73

82

75

88

93

137

Primary Distribution
Ry. freight car loadings, mdse, and misc.
Ry. freight car loadings, other..................
Exports...........................................................
Imports...........................................................

85
94
113
80

103
117
103
94

103
116
114p
91p

103
114

Distribution to Consumer
Department store sales (U.S.)...................
Grocery chain store sales............................
Variety chain store sales.............................
Mail order house sales.................................
New passenger car sales r ...........................

96
99
106
103
80

99
99
108r
108
118

108
99
108
111
104r

125
103p
126
131
90p

Velocity of Deposits*
Velocity of demand deposits, outside New
York City (1919-25 average = 100)----Velocity of demand deposits, New York
City (1919-25 average = 100)...............

53

60

57

61

23

27

26

27

Cost of Living and Wages*
Cost of living (1935-39 average = 1 0 0 )...
Wage rates (1926 average = 100).............

104
114

108
122

109
123

IlOp

p Preliminary.
r Revised; in the cases of wool and new passenger car sales,
the series have been revised.
* Not adjusted for trend.

M ILLIO N S
o r D O LLARS

B u ild in g

DuringAugustthedailyrateof constructioncontract
awardsfor37EasternStatesrose83percentabovethe
figureforAugust, 1940tothehighestlevelinanymonth
coveredbytheF. W. DodgeCorporationrecordswhich
beganin1925. Awardsforresidential buildingwerethe
largest since April, 1929, andnonresidential building
contractswereawardedatthehighestrateonrecord.
Contract awards for defense purposes havebeenac­
countingforanincreasingproportionof newconstruc­
tionprojects. Alittleoverhalfofthecontractsincluded
inthetotalsforAugust wereGovernment awards con­
nectedwiththedefenseprogram. Thiscompareswith42
per cent for suchawards inJuly and22 per cent in
Augustoflastyear.




Nonresidential Building Contracts Awarded in 37 States During First
Eight Months of 1940 and 1941, Classified by M ajor Groups
(Based on F. W . Dodge Corporation data)

MONTHLY REVIEW, OCTOBER 1, 1941

80

announcedonSeptember19bytheOfficeof Production Fromweeklyreports gatheredfromasmallerlist of
Management. Prioritiesunderthis orderarescheduled stores, it appears that the gains over ayear previous
for approximately 200,000 privately financeddwelling were largest early in August and thereafter receded
units and 100,000 units financed by the Government, graduallythroughtheremainderof themonthandinto
whichtogetherareequaltomorethanhalf theestimated September. Anaccelerationof salesagainoccurredin
numberofnewnonfarmdwellingunitsprovidedin1940 thelatter part of September inanticipationof excise
for the entire country. Inthe nonresidential building taxeseffectiveOctober 1, but forthemonthasawhole
fieldthe Supply Priorities andAllocations Boardhas salesfailedtoshowasmuchexpansionoverAugust as
takenthepositionthattheexpansionofprojectsfornon­ usuallyoccurs, althoughitisestimatedthataveragedaily
defense purposes is undesirable if they require large salesexceededthoseofSeptemberoflastyearbyapproxi­
amountsofmaterialsneededinthedefenseprogram.
mately13percent.
InNewYorkandNorthernNewJerseythedailyrate hemostsubstantialincreasesinsalesbetweenAugust,
ofconstructioncontractawardsduringAugustwasabout 19T
0andAugustofthisyearoccurredinsalesofhosiery,
one-thirdabovethe correspondingmonthof last year. un4
d
ear, furs andfur-trimmedcoats, homefurnish­
Ofthemajorclassifications, awardsforresidentialbuild­ ingse,raw
n
dhouseholdappliances.
ing,whichmadeupalittleoverhalfofallawards,showed
the largest year-to-year increase, amounting to40 per Retail stocksof merchandiseonhandinthereporting
cent. Awards for nonresidential buildingwereupone departmentstoresattheendofAugustwere26percent
third, whileheavyengineeringprojects wereabout un­ higherthanat theendof August, 1940, andwerealso
considerablylargerthanat theendof Julydespitethe
changed.
h
ighrate of sales inAugust. Returns fromalimited
Ofthecontractsincludedinthemonth’stotalforNew nu
berofdepartmentstoresinthisDistrictindicatethat
YorkandNorthernNewJersey, only14percentrepre­ outm
s
t
ding orders for merchandise purchasedby the
sentedGovernmentcontractsfordefensepurposes. This storesa,nb
tnotyetdelivered, wereovertwiceaslargeas
compareswith46and18percent, respectively, forJune thoseofu
A
ugust31, 1940.
andJuly.
Percentage changes from a year ago

D e p a r tm e n t S to re T r a d e

Asinothersectionsof thecountry, retail tradeinthe
SecondFederalReserveDistrictwasexceptionallyactive
duringAugust. Salesof departmentstoresreportingto
thisbank,onanaveragedailybasis, wereapproximately
one-thirdlargerthaninAugust of last yearandabout
25 per cent greater thaninJuly, as indicatedonthe
accompanyingchart. Whilemoderateincreasesinsales
characteristically occur betweenJuly andAugust, the
month-to-monthadvance this year was the largest re­
cordedsincethisbankbeganitsworkofcollectingdepart­
mentstoresalesfiguresmorethantwentyyearsago.
PER CEN T

Net sales

Stock on hand
end of month

Department stores
August,
1941

Jan. through
August, 1941

August,
1941

+26
+30
+29
+38
+ 43
+22
+ 23
+ 32
+ 29
+40
+38
+ 41

+ 12
+16
+15
+23
+27
+ 13
+15
+20
+1 6
+23
+ 27
+23

+25
+25
+23
+ 47
+ 39
+2 2

New York City (includes Brooklyn). . .
Northern New Jersey...............................
Newark....................................................
Westchester and Fairfield Counties. . . .
Lower Hudson River Valley...................
Poughkeepsie..........................................
Upper Hudson River Valley...................
Central New York State.........................
Northern New York State.......................
Southern New York State.......................
Binghamton ..........................................
Western New York State........................
Niagara Falls..........................................

—

+4 4
+43
+6 0
+38
+45
+37
+30

—

+35
—

+35
+34
+36
—

—

+23

+23
+23
+34
+ 21
+ 27
+13
+15

—
+25
+27
+21
+24

—

All department stores...........................

+30

+15

+26

Apparel stores.............................................

+ 39

+12

+ 29

Indexes of Department Store Sales and Stocks, Second Federal Reserve District
(1923-25 average=100)
1941

1940

Sales (average daily), unadjusted.................
Sales (average daily), seasonally adjusted..
Stocks, unadjusted............................................
Stocks, seasonally adjusted.............................

Index o f Dollar Volume o f Sales o f Reporting Department Stores in
Second Federal Reserve District, not Adjusted for Seasonal
Variation (1923-25 average= 1 0 0 per cent)




r Revised

August

August

June

July

76
101

98
102

81
114

101
134

85
90

83
96

98
103

79r
83r

FE D E R A L RESERVE B A N K OF N E W Y O R K
MONTHLY REVIEW, OCTOBER 1, 1941

Business Conditions in the United States
(Summarized by the Board o f Governors o f the Federal Eeserve System)

I N D U STRIAL

activity increased further in August and the first half o f
September, and commodity prices continued to advance. Distribution o f
commodities to consumers expanded considerably.

Index o f P h ysical V o lu m e o f Industrial Produc­
tion, A d ju ste d for Seasonal Variation
( 1 9 3 5 -1 9 3 9 a v e r a g e ^ 1 OO per cen t)

Index o f Total Loadings of R evenue F reight,
A d ju ste d for Seasonal Variation ( 1 9 3 5 -1 9 3 9
a v e r a g e = 1 0 0 per c e n t; m iscellaneous, coal, and
all other car loadings expressed in term s o f
points in total index)

U . S . B ureau o f Labor S tatistics Indexes o f
W h o lesa le P rices, B ased on 12 F o odstuffs and
16 Industrial M aterials (A u g u s t, 1 9 3 9 = 1 0 0
per cen t)

CENT

pen CENT

TFtEASURY 'HONOS
j ^

<
* \A v
A ,
r 'W jk ,

k

J

TREASURY NOTES
I
V
T“

'
’W

v \i

/*

v js

TREASlJRY BILLS

• * v .
-

1935

1936

1937

1938

1939

1940

M oney Rates in New Y ork City




1941

P roduction
In August industrial output increased somewhat more than seasonally and
the B oard’s adjusted index advanced from 160 to 161 per cent o f the 1935-39
average. There were sharp further advances in activity in the machinery, air­
craft, shipbuilding, and railroad equipment industries. Lumber production
also increased, while furniture production, which had been unusually large in
July, showed less than the customary seasonal rise in August. Output o f steel
and nonferrous metals continued at near-capacity rates.
In the automobile industry output o f finished cars declined sharply as
plants were closed during the changeover to new model production and output
in factories producing bodies and parts also was reduced considerably. In the
first half of September automobile assemblies increased as production o f new
models was begun but from now on, owing to Government restriction on passen­
ger car production, output will be considerably below that during the previous
model year.
In most nondurable goods industries production in August continued
around the high levels reached earlier this year. A t cotton mills activity
declined slightly from the record level reached in July, while at woolen mills
there was some increase. Rayon output continued at peak levels. In the silk
industry operations were curtailed sharply, as the Government requisitioned all
supplies o f raw silk, and deliveries o f silk to mills declined from 28,000 bales
in July to 2,000 in August. Rubber consumption also decreased, owing to a
Government curtailment program. Shoe production, which had been unusually
large, increased less than seasonally in August, and output o f manufactured
food products and chemicals showed seasonal increases from the high levels
prevailing in June and July.
A t mines coal production in August, as in other recent months, was
unusually large for the season, and output o f crude petroleum rose to a record
level o f 4,000,000 barrels daily in the latter part o f the month. Iron ore ship­
ments down the Lakes amounted to 11,500,000 tons, the largest monthly total
on record.
Value o f construction contract awards showed a further sharp increase in
August and was about four-fifths larger than a year ago, according to F. W.
Dodge Corporation reports. The rise from July was substantial for all general
types o f construction but was most pronounced for publicly financed projects.
Awards for residential building continued to increase.
D istribution
Sales o f general merchandise rose sharply in August and wTere at an
extremely high level for this time o f year. The B oard’s seasonally adjusted
index o f department store sales advanced to 133 per cent o f the 1923-25 average
as compared with 115 in July and an average o f 103 in the first half o f this
year. In the early part o f September department store sales declined from the
peak reached in the latter part o f August.
Railroad freight car loadings in August were maintained in the large
volume reached in June and July. Coal shipments increased, following some
reduction in July, while loadings o f grain, which had been large since last
spring, declined.
Commodity P rices
Wholesale prices o f most groups o f commodities continued to advance from
the middle o f August to the middle o f September. Prices o f grains, other food ­
stuffs, and cotton showed large increases and there were advances also in prices
of a number o f industrial commodities not covered by Federal price ceilings.
Fragmentary data available indicate that retail prices of foods and other
commodities rose further during this period.
A griculture
The outlook for agricultural production in 1941 showed little change during
August. Crop prospects were reduced slightly by drought but aggregate crop
production is expected to be two per cent larger than last year and the largest
for any year except 1937. Total marketings o f livestock and livestock products
will probably be the largest on record. Preliminary estimates o f the Depart­
ment o f Agriculture indicate that cash farm income, including Government
payments, will be about $10,700,000,000, compared with $9,120,000,000 in 1940.
B ank Credit
Commercial loans at reporting member banks in 101 cities continued to rise
substantially during the four weeks ended September 10. Bank holdings o f
United States Government securities showed little net change, while holdings
o f other securities increased somewhat at New York City banks. As a result o f
the expansion in loans and investments bank deposits continued to increase.
U nited States Government Security M arket
Prices o f Treasury bonds increased in the latter part o f August but subse­
quently declined somewhat in the first part o f September. On September 15,
the partially tax exempt 2% per cent 1960-65 bonds were yielding 2.06 per cent
compared with the record low yield o f 2.02 per cent. Yields on Treasury notes
showTed little change in the period.