View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

MONTHLY REVIEW
O f Credit and Business Conditions

F E D E R A L
V o lu m e

R E S E R V E

38

B A N K

OCT O BER

OF

N E W

Y O R K

19 56

No. 10

MONEY M ARKET IN SEPTEMBER
Pressures in the money market remained relatively

registered net advances. Recurrent rumors of a reduction

steady during September. On a statistical basis there was
actually some easing of bank reserve positions, associated

in member bank reserve requirements and the announce­
ment on September 2 0 of an easing of mortgage credit by

with an unusually large midmonth expansion of float and

Government agencies contributed to a shift in psychology,

the Treasury’s cash redemption of Government securities

and prices advanced, in quiet trading, largely on profes­

maturing on September 1 5 in advance of the collection of
income tax checks in volume. Although the over-all re­

sional markups. Nonetheless, the market continued to be
characterized by an underlying uncertainty, as inflationary

serve position of member banks fluctuated widely over the

tendencies still pointed to the maintenance of strong de­

month, the reserves available on balance were apparently

mands for credit and capital, which it was feared might

adequate to provide for a seasonal growth of business loans

mean higher rates of interest and lower prices for Govern­

comparable to that of a year ago.

ment securities.

Reserve positions of

T o w ard the end of the month, prices

N ew Y o rk and Chicago central reserve city banks con­
tinued tight most of the month, and the Federal funds rate

declined somewhat but did not reach earlier lows, appar­

remained almost steadily at 3 per cent, except for brief

Federal Reserve were aimed at accommodating necessary

declines at the end of each statement week.

seasonal requirements, including those of the Treasury.

A further

reflection of the relatively tight conditions in N ew Y o rk
was the maintenance of the rates charged by N e w Y o rk
banks on call loans to Governm ent securities dealers gen­
erally at 3 Vi per cent, after advances early in the month.

ently because of a growing view that the actions of the

Treasury bill rates, after declining early in the month,
rose to record highs for the postwar period on Septem­
ber 2 5 . The increases were brought about, to some extent,
by the sizable sales which corporations made in order to

Federal Reserve System open market operations during

meet tax and dividend disbursements, by the sales of the

the four weeks ended September 2 6 alternately injected

Federal Reserve System, and by the influence of market

and withdrew reserves in order to mitigate the fluctuations

expectations that the Treasury would soon be borrowing
additional amounts for cash in the very short-term area.
Tow ard the end of the month, however, rates declined
somewhat as demand revived and offerings tapered off.

in reserve positions and adjust to seasonal requirements.
Before the Lab o r D a y week end, when the usual sharp
increase of currency in circulation w as reducing reserves,
substantial outright purchases were undertaken. Together
with purchases made toward the end of August, these
aggregated 4 1 1 million dollars. Subsequently, however,
as the expansion of float and the return flow of currency
from circulation, along with a sharp decline in Treasury

The atmosphere in the markets for corporate and mu­
nicipal bonds improved during September, as yields on

CONTENTS

balances at Federal Reserve Banks, added to reserves,

Money Market in September.......................... 137

System holdings of Government securities declined by 2 7 6

International Monetary Developments............ 141

million dollars. Repurchase agreements with Government
securities dealers were written from time to time when
tem porary strains appeared in the market, and the volume
outstanding reached a peak of 8 5 million dollars on one
day; total repurchase agreements outstanding at the close
of the period amounted to 4 0 million dollars.
The prices of most Government notes and bonds leveled
off early in September and, over the month as a whole,




Business Inventories and Economic
Fluctuations ...................................................

143

Monetary Control in a Rapidly Developing
Economy: the New Zealand Royal Commis­
sion R eport...................................................... 147
Selected Economic Indicators.......................... 152

MONTHLY REVIEW, OCTOBER 1956

138

credit for seasonal needs would be available, resulted in

exceeded their borrowings from the Federal R eserve Banks
on a daily average basis for the first time in over a year.
Aside from this temporary and unusual easing, net bor­

a generally good response to the heavy volume of flota­
tions, and dealers were able to make reductions in inven­

August.

new issues advanced to levels that were attractive to inves­
tors. The higher yields, and the growing expectation that

tories of unsold issues.

rowed reserves remained close to the levels recorded in
E a rly in the month, banks lost reserves chiefly from the

Com m ercial paper dealers raised their rates Vs per cent

sharp seasonal increase in currency in circulation as de­

on September 4, and a further Vs per cent increase was

positors withdrew cash for the L a b o r D a y week end, while

announced on September 2 8 , bringing the rate on prime

the average level of float continued to decline. These losses

four-to-six months5 paper to 35 per cent.
/s

were more than offset, however, by a continuation of

On Septem­

ber 2 7 and 2 8 , four large finance companies announced an

sizable outright purchases of Governm ent securities by

advance in their rates on directly placed commercial paper

the System, amounting to 1 3 3 million dollars during the

by

week ended September 5 .

to % of 1 per cent, effective on September 2 8 and

October 1 ; the new rate on the 3 0 to 89-d ay paper of
these companies is 3V4 per cent.

Federal Reserve funds were

also supplied through the extension of repurchase agree­
ments with Governm ent securities dealers, although the in­
crease was actually very moderate since dealers generally

M

em ber

B ank R

eserve

P o s it io n s

found funds available elsewhere to meet their financing

M em ber bank borrowings from the Federal Reserve
Banks were somewhat lower during the four weeks ended
September 2 6 , averaging 7 9 2 million dollars as compared
with 9 2 3 million in the previous four weeks. M oreover,
the margin of borrowings over excess reserves shrank from
3 4 4 million dollars in the four weeks of August to 1 7 9
million dollars in the recent period. M ost of the decline
was accounted for by the easing during the week ended
September 1 9 when the excess reserves of member banks
Table I

In the two subsequent weeks, an unusually early and
sharp midmonth rise in float and Treasury operations
tended to reduce net borrowed reserves. A feature of
the period was the cash redemption of the 9 8 2 million
dollars of 23 per cent Governm ent bonds of 1 9 5 6 - 5 9 ,
A
called for September 1 5 .

These and other Treasury dis­

bursements were only partly offset by Treasury calls, espe­
cially on Class C banks, so that Treasury balances at F e d ­
eral Reserve Banks declined sharply. Furthermore, delays
in the processing of checks, as the volume of checks flowing

Changes in Factors Tending to Increase or Decrease Member
Bank Reserves, September 1956

into Reserve Banks from all sources rose sharply, caused
a large increase in float. In addition, a return flow of cur­

(In m illions of d o lla rs; ( + ) denotes increase,
(— ) decrease in excess reserves)
Daily averages— week ended
Net
changes

Factor

requirements.

rency began during the week ended September 1 2 and
continued in the next week, thus adding to reserves. These
factors converged in the third statement week of the month
with the result that, despite a decrease of more than 2 4 0

Sept.
5

Sept.
12

Sept.
19

Sept.
26

Treasury operations*..............................
Federal Reserve float..............................
Currency in circulation..........................
Gold and foreign account......................
Other deposits, e tc ...................................

+ 60
- 42
-1 6 9
- 57
+ 32

- 90
+2o8
-1 2 3
+ 20
+
1

+ 65
+444
+100
+ 36
+ 13

-2 0 0
— 95
+ 96
+ 15
+ 10

-1 6 5
+565
- 96
+ 14
+ 56

million dollars in System holdings of Governm ent securi­
ties, member bank borrowings declined sharply while ex­

T o ta l............................................

-1 7 5

+

66

+658

-1 7 6

+373

reserves was, however, concentrated in country banks, and

+226
+
1

+
-

11
2

— 156
- 11

-1 1 8
+
3

-

Operating transactions

Direct Federal Reserve credit trarisactions
Government securities:
Direct market purchases or sales. .
Held under repurchase agreements.
Loans, discounts, and advances:
Member bank borrowings.................
Other..........................................................
Bankers’ acceptances:
Bought outright....................................
Under repurchase agreements.........

the central reserve city banks continued to be under pres­

-1 3 9
—

+216
—
__
2

37
9

-3 5 8
—

+

51
—

-2 3 0
—

-

1
—

-

1
—

-

63

-2 7 5

1
—

+
+

1
2

To ta l............................................

+

92

+222

— 526

-

Total reserves....................................................
Effect of change in required reserves^ . . . .

+

83
33

+288
- 20

+ 132
-1 1 4

— 23S
+ 55

+
-

98
46

-

50

+268

+

18

-1 8 4

+

52

796
449

1,012
717

654
735

705
551

Daily average level of member bank:
Borrowings from Reserve B anks. . . .

cess reserves were relatively large. Th e bulk of the excess

-

sure.

Part of the difference in the incidence of ease or

pressure was related to shifts in the distribution of Treasury
cash balances, notably as the result of a heavy call that
was made on Class C depositaries on September 1 7 .
In the final statement week, as bank reserve positions
moved back to a net dependence upon borrowed reserves,
money market pressures were virtually unchanged. C on ­
tributing to the shift in reserve positions w7 a sharp con­
as
traction in float. In addition, Treasury balances at Reserve

7921
6131

Banks increased as the result of heavy collections of tax
checks, the rise being only partly offset by redeposits at

Note: Because of rounding, figures do not necessarily add to totals.
* Includes changes in Treasury currency and cash,
f These figures are estimated,
j Average for four weeks ended September 26.




the Class C banks— which had been subject to large calls
the previous week.

FEDERAL RESERVE BANK OF NEW YORK
G o v e r n m e n t S e c u r it ie s M

arket

Th e prices of Government notes and bonds, which had
exhibited a downward trend since m id-June, leveled off in
early September and then staged a sharp advance, only to
decline again toward the close of the month. Despite the
advance in prices, which by September 2 0 carried the
longer 2 V i’s up to as much as IV s points above the
end-of-August levels, the market was characterized by an
underlying uncertainty as to the future course of interest
rates. M an y observers looked for a continued strong de­
mand for credit and for inflationary tendencies that might
result in the maintenance, or even intensification, of tight
credit conditions.

On the other hand, persistent rumors

of a reduction in member bank reserve requirements, the
measures taken by several Government agencies to increase
the availability of and ease the terms on mortgage credit,
and a growing feeling that the Federal Reserve would pro­
vide the funds necessary for essential seasonal credit needs
gave rise to more sanguine expectations in some quarters.

139

Tow ard the end of the month rates declined somewhat, but
at the close the longest outstanding bills were bid at 2 .9 1
per cent, up 2 5 basis-points for the month as a whole.
O

ther

Se c u r it ie s M

arkets

The corporate and municipal bond markets showed an
improved tone in September, as higher yields, combined
with expectations that the likelihood of further advances
had diminished, led to a favorable response from investors
to a heavy volume of new issues. In line with the advance
in yields on new issues, prices of outstanding corporate
bonds declined on balance, despite advances at the close
of the month. A verage market yields on seasoned corpo­
rate issues, as reflected in M o o d y’s A aa-rated corporate
bond index, rose by 7 basis-points to 3 .5 8 per cent on
September 2 4 , but dipped to 3 . 5 7 on September 2 8 .
Yields on similarly rated municipal bonds rose by 1 basispoint to 2 .6 3 per cent in midmonth, but dropped back to
2 .6 2 as the month ended.

Trading activity in the Governm ent bond market was
light through most of the month, as switching for tax pur­

The estimated volume of public offerings of corporate
bonds for new capital in September rose, in part sea­
sonally, to 4 8 0 million dollars, com pared with a revised

poses contracted and outright demand remained small.

estimate of 2 4 0 million dollars for August.

The advance in prices took place on a small volume of out­

yields were sharply higher than earlier in the year, and

right trading and largely reflected professional markups
and interdealer trading. A t the same time, sales of the

most new issues met with a good reception. Thus a 2 0
million dollar flotation of A -rated utility bonds met with

Reoffering

two longest bonds b y investors switching into corporate

a good response from investors when reoffered just before

bonds held down price increases for these two issues.
Tow ard the end of the month, prices of almost all issues

midmonth at a yield of 4 .4 1 per cent, 4 1 basis-points
higher than a similar issue at the end of Ju ly. Similarly,

were marked down. O ver the month as a whole, however,
most issues maturing after 1 9 6 1 showed net increases of

several A a-rated issues were successfully reoffered at yields
close to 4 .2 0 per cent, in contrast to offerings at about 3 .7 0

between 12/22 and 1(>32 of a point. The 3 per cent bonds
of 1 9 9 5 rose in price by % 2.

per cent in late Ju ly which encountered investor resistance;
late in September, however, another A a-rated issue met

Treasury bill rates, after declining toward the end of

with a good response when priced to yield 4 .0 1 per cent.

August, turned up on September 1 0 and subsequently ad­
vanced to record highs for the postwar period. E a rly in
the month demand from nonbank investors tended to push

A symptom of the better atmosphere was the successful
offering of 7 5 million dollar issues by two sales finance

rates down. In the September 1 0 auction, however, the
average issuing rate rose slightly from 2 .7 3 6 per cent in
the auction held prior to the La b o r D a y week end to 2 .7 7 0
per cent, as diverse considerations including uncertainty

companies, one of which had twice postponed issues sched­
uled in June and August because of unsatisfactory market
conditions. Publicly announced postponements or cancel­
lations in September were moderate, amounting to an esti­
mated 60 million dollars.

over the impact of the September 1 5 tax date made dealers

Th e market for new municipal securities also showed

cautious. Subsequently, bill rates moved still higher under

a better tone, despite a rise in estimated public offerings

the influence of sales by corporations for tax and dividend

to 3 0 0 million dollars from 16 0 million in August, and

disbursement purposes, System sales to offset some of the

underwriters were able to reduce their inventories of un­

accruals to bank reserves, and growing market expectations

sold issues. M unicipal issues were received somewhat less

that the Treasury would soon be borrowing additional

enthusiastically than corporate offerings but in general

funds in the short-term area.

met with a good response from investors when reoffered

In the succeeding auction,

the average issuing rate for the bills dated September 2 0

at attractive yields. Illustrative of the better tone was the

moved to 2 .9 0 8 per cent, a new postwar high. Rates on
outstanding Treasury bills continued to advance, and in

rapid sale and premium bid on a 2 5 million dollar flotation
of A -rated Port of N e w Y o rk Authority bonds, which were

the final auction of the month for the bills dated Septem­

reoffered at 3 .4 5 per cent as compared with a 3.0 0 per

ber 2 7 , the average issuing rate rose to 2 .9 8 5 per cent.

cent yield on a similar issue by the same agency in M ay.




140

MONTHLY REVIEW, OCTOBER 1956
M

em ber

B

ank

C

largely seasonal, increase also took place in loans to food,

r e d it

Total loans and investments at all weekly reporting

liquor, and tobacco firms.

member banks declined 1 4 million dollars during the four

Reporting banks reduced their investment portfolios on

weeks ended September 1 9 , as a 3 7 2 million dollar increase

balance during the four weeks ended September 1 9 , in

in total loans was offset by a 3 8 6 million dollar decline

contrast to the preceding four weeks when investments

in investments.

increased largely as the result of acquisition of the new
tax anticipation certificates. In the current period, hold­

The expansion of total loans was somewhat larger than
in the preceding four weeks, but fell below the rate of

ings of Government securities other than bills dropped by

increase recorded a year ago largely because of the con­

6 1 0 million dollars, as the tax anticipation certificates were

tinued sharp contraction in security loans.

R eal estate

distributed to nonbank investors and as the Treasury bonds

loans advanced at about the same pace as in previous

called for September 1 5 were redeemed for cash. H old­

months, while consumer loans recorded a very small
Th e bulk of the expansion continued to be

ings of Treasury bills rose by 1 3 4 million dollars, and port­
folios of non-Governm ent securities by 90 million dollars,

accounted for by business loans (including agricultural

the latter increase being presumably attributable in part

loans), which rose by 5 1 2 million dollars, about the same

to the attractive yields on new offerings.

net decline.

amount as in the similar 1 9 5 5 period. M ost categories of

F o r the year thus far, total loans at weekly reporting

business loans showed increases during the current period,

banks have risen 3 .2 billion dollars, com pared with an

although almost 3 5 per cent of the rise was accounted for

increase of 4 .3 billion in the comparable period last year,

by net borrowings of 1 7 4 million dollars by firms in the

while total investments declined by 4 .1 billion dollars as

petroleum, coal, chemical, and rubber classification; this

against a 6 .3 billion decrease in the comparable period last

substantial increase was reportedly attributable in con­
siderable part to one large oil company. A sizable, though

year (see ch art). The advance in loans so far this year
is largely accounted for by a 3 .0 billion dollar increase

Table II

half of the total loan increase w as due to business loans.

in outstanding business loans, whereas last year only about
Weekly Changes in Principal Assets and Liabilities of the
Weekly Reporting Member Banks
(In millions of dollars)
Statement weeks ended
Item
Aug.
29

Sept.
5

Sept.

12

Sept.
19

A striking difference between the two years was the much

Change
from Dec.
28, 1955
to Sept.
19, 1956

period.

In addition, the growth in real estate loans has

been only about 60 per cent as large, and in consumer
loans only half as large, as last year.

Assets
Loans and investments:
Loans:
Commercial and industrial
loans........................................
Agricultural loans...................
Security loans..........................
Real estate loans.....................
A ll oth e r lo a n s (la rg e ly
consumer).............................

sharper decline in security loans, which have so far fallen
by 7 8 4 million dollars more than in the com parable 1 9 5 5

-1 2 9

+

1

+

45
9

+190
+
9
- 51
+ 28

+

34

+

30

- 12

-

-

-

13

1

+ 183

+

4

+136
+
+

4S
23

+

988
651

70

+

CHANGES IN LOANS AND INVESTMENTS
WEEKLY REPORTING MEMBER BANKS

684

+

4

+ 2 ,9 8 7

Total loans adjusted*. .

-1 0 7

+ 175

+162

+142

+ 3 ,2 0 9

Investments:
U. S. Government securities:
Treasury bills.................
Other..................................

- 78
-2 0 5

— 85

+112
- 68

+185
-3 4 7

775
- 2 ,9 6 4

-2 8 3
+ 74

+

75
43

+

44

-1 6 2

Billions of dollars

-3 ,7 3 9
363
- 4 ,1 0 2

T o t a l ... . . .
Other securities.

+ 10

- 22

Total investments.

-2 0 9

32

+ 22

-1 6 7

T o ta l loans and investm ents
adjusted*...................................

-3 1 6

+143

+184

-

-

893

Loans to banks.

90

+142

+143

- 21

+

320

Loans adjusted* and “ other’
securities.......................................

33

+218

+140

+137

+ 2 ,8 4 6

25

Liabilities
Demand deposits adjusted. .
Time deposits except
Government...........................
U. S. Government deposits..
Interbank demand deposits:
Domestic.................................
Foreign.....................................

+374

-4 8 1

+857

+ 131

+ 35
-4 0 5

- 28
-4 4 1

+100
-9 1 0

- 37
+398

— 95
- 37

+791
+ 42

+464
- 28

-1 9 5
+ 44

- 2 ,9 7 4
+
+

348
431
55
119

* Exclusive of loans to banks and after deduction of valuation reserves; figures
for the individual loan classifications are shown gross and may not, therefore,
add to the total shown.




Septem ber 19, 1956.

1 9 5 5 -5 6 *

Billions of dollars

141

FEDERAL RESERVE BANK OF NEW YORK

INTERNATIONAL MONETARY DEVELOPMENTS
M onetary

T rends

and

P o l ic ie s

Effective September 6 the W est Germ an discount rate
was lowered to 5 per cent from SVi\ this action followed
three successive increases between August 1 9 5 5 and last
M a y (see chart). It has been officially stated that the latest
move is not the result of a reversal in the Bank deutscher
Land er’s estimate of the basic economic trends in Germ any,

sional” borrowers reduced their bank indebtedness, while
the engineering, shipping and shipbuilding, and chemical
industries

increased

their

borrowing.

Loans

to

hire-

purchase finance companies were reduced further during
the quarter, and the total amount of hire-purchase debt
outstanding fell during Ju ly as in every previous month
this year and is now 1 3 per cent below Decem ber 1 9 5 5 .

but rather is a response to an easing in the economic
situation.

It is also hoped that the discount rate reduc­

tion m ay help alleviate the current stringency in the
capital market.

INTEREST RATES IN SELECTED F O R E IG N C O U N T R IE S

The slackening of the Germ an boom is

...............Long-term government bond yield (GB)
*■ «*“ Treasury bill rate(TB)
“
am m Day-to-day money (DM)
m ttm
---- ----- --Discount rate (DR)

reflected in the 7 per cent decrease in industrial production
during June and Ju ly, the slower expansion of demand
Percent

UNITED KJMGDOM

WEST GERMANY

Furthermore, bank credit declined in Ju ly and, while

y

this was partly seasonal, the drop was much larger than

H

r
(

,

.B *

last year and apparently continued through August. The
/ * . ;

serves resulting from the heavy foreign exchange inflow

A

.

.
% *« *

in Ju ly and A ugust for the purpose of reducing their indebt­

s

commercial banks used part of the increase in their re­
* **

V dm

edness to the central bank (another part of this inflow hav­

!

1 J

J.

1

1
..

1
..L

i .j . j

ing been offset by substantial open market sales by the
central b a n k ). Nonetheless, bank liquidity increased, and
short-term interest rates m oved downward from the Ju ly
peak. Lo w er interest rates m ay well make Germ any less
attractive for foreign short-term capital; actually, the influx
of foreign exchange fell off sharply in August. However,
the underlying expansionary forces in the Germ an econ­
om y remain strong, and the authorities have stated that
they stand ready to meet with tightened credit restraints
any renewed surge of demand such as might be set off by
the prospective reduction in taxes, further wage increases
in excess of the growth of productivity, or the impending
expansion of defense expenditures.
In the United Kingdom, the latest quarterly statement
of the British Bankers’ Association reveals a further slight
increase in loans to the public sector, which more than

Per ce
...............................................................................................................................................................................................................................! . ................................ "

N

and new orders, and the stability of prices since M arch.

1

offset the continued decline in advances to private bor­
rowers. Although advances had also increased during the
preceding quarter, the total of advances outstanding in midA ugust was still almost 1 0 per cent less than a year earlier
and seems to have been further reduced in the following
five weeks. In the three months to m id-August the public
utilities and local authorities increased their borrowing by
48 million pounds; in the private sector, where net borrow­
ing declined by some 3 1 million, the food, drink, and
tobacco industries, retail trade, and “ personal and profes­




19 5 4

1955

1956

1954

1955

1956

Note: September figures based on incomplete data.
X West Germany: IB covers 8 per cent industrial bonds.
Australia: GBS covers short-term (two-year basis) government bonds.
Sources: National statistics; International Monetary Fund, International
Financial Statistics.

142

MONTHLY REVIEW, OCTOBER 1956

The London money market continued tight during Sep­
tember and, although there reportedly were official pur­
chases of bills, the discount houses were on several occa­
sions obliged to borrow directly from the Ban k of E n g ­
land. Th e reduction in the London Clearing B an ks’ hold­
ings of government bonds, which had been interrupted

ments of which are tied to Paris stock and bond prices;
the rate for day-to-day money in Fran ce has shown no
clear trend this year. The yields on both short and long­
term Australian Government bonds rose sharply in M arch,
after the central bank withdrew its support from the m ar­
ket, and stood at postwar peak levels in June.

in Ju ly, was resumed in the four weeks ended in midAugust when the banks’ investments fell by roughly 7 5
million pounds— one of the largest declines ever recorded
for a single month. T h e banks, however, made large pur­
chases of Treasury bills, and as a result their liquidity ratio
rose to 3 5 .6 per cent. Y ield s on gilt-edged securities have
continued their slow upward trend; the return on 2 Vi per
cent Consols reached 4 .9 0 per cent on September 1 8 — the

E xchange R ates

Am erican-account sterling fluctuated during September
between $ 2 . 7 8 x and $ 2 . 7 8 1% 2, with quotations generally
/4
on the lower side but occasionally tending to be firm. Sea­
sonal pressures, along with concern over developments
related to the Suez Canal situation and the wage demands
of British unions, continued to be the principal forces m ak­

highest level in more than twenty years— but closed at 4 .8 4

ing for weakness; in the final days of September, however,

on September 2 8 . A s the accom panying chart shows, the

the Israel-Jordan border difficulties were also of some im­

average tender rate for three months’ Treasury bills has

portance.

moved upward, reaching 5 . 1 7 per cent at the third Septem­

was somewhat stronger in the last half of the month.

ber tender but declining to 5 .0 9 at the fourth tender.

A m o n g commercial concerns, oil interests were important

Com m ercial demand w as generally light, but

Elsewhere, too, interest rates have continued to rise.

both as buyers and as sellers o f sterling at various times

In Canada, government bond yields were generally higher,
and at the fourth tender in September the average rate for

during September; fairly large offerings of dollars in

three months’ Treasury bills reached a new high of 3 . 1 6
per cent. Effective September 1 5 , Canadian banks raised
the interest rate on personal savings accounts to 2 Vi per
cent from 2 V*\ this was the second increase in six weeks,
the 2 V4 rate having been in effect only since A ugust 1.
Business loans by the chartered banks stood virtually un­
changed during the first two statement weeks in September,
and during the third week dipped slightly; on September 19
business loans outstanding were 2 1 . 7 per cent above a year
ago against 2 4 .8 per cent at the end of August. The
liquidity position of the chartered banks has been easier
for the past eight weeks; September was the first month in
more than a year in which there was no reduction in the
banks’ holdings of government bonds, and there has been
no borrowing at the Ban k of Canada since the middle
of August.
The increase in interest rates in the Netherlands, where
the discount rate w as raised twice this year, has been

London and demand for sterling in N ew Y o rk by oil com ­
panies were m ajor factors in setting the highest quotation
on September 1 1 .
Th e general weakness of sterling was also evident in
other rates. Thus, the discounts on sterling for three and
six months’ delivery rose from 1 % 6 and 2 17/S2 cents to

1 1 % 2 and 3 % 2 at the month’s end, with somewhat higher
discounts at the midmonth that largely reflected offerings
in the London market. Transferable sterling also declined,
falling to $ 2 . 7 5 0 5 — the lowest quotation since February
1 9 5 5 — on September 1 4 , at which time official interven­
tion reportedly eased the pressure. Subsequently, however,
strong bidding from the Continent, representing purchases
for covering short positions in the market, improved the
rate, and on September 2 8 the quotation stood at $ 2 . 7 6 1 5 .
Securities sterling fluctuated between $ 2 .6 0 and $ 2 . 6 4 % ,
being generally easy but with occasional demand on the
part of stock houses.
Th e Canadian dollar met with very good demand dur­

especially notable; the market rate for Treasury bills with

ing the first part of September.

three months to maturity rose in A ugust to a peak postwar

Canadian dollars of the proceeds of new Canadian bond

T h e conversion into

level of 3 per cent from 1 .3 8 in January, and government

issues floated in the N e w Y o rk market, a strong investment

bond yields have reached the highest level since early 1 9 5 2 .

demand from London, and fair commercial purchases,

Swiss bond yields, after slumping during the winter, re­

especially by grain interests, were major factors in moving

covered to last fall’s peaks during the second quarter of

the rate to $ 1 . 0 2 4% 4 on September 1 4 ; this quotation was

this year, and in the third quarter attained a new seven-

the highest since February 1 9 5 5 . In the latter part of the

year record. Th e rate of return on government bonds in

month, however, activity declined somewhat and rates were

Fran ce lias fluctuated around a slightly rising trend, the

noticeably easier at about $ 1 . 0 2 % 6 until September 2 8 ,

rise in September possibly reflecting selling for reinvest­

when the Canadian dollar rose to $ 1 . 0 2 3 % 4 at the m ar­

ment in the new government loan, the redemption p ay­

ket’s close.




143

F E D ER AL R ESER VE B A N K OF N E W Y O R K

BUSINESS INVENTORIES AND ECONOMIC FLUCTUATIONS
Business outlays for inventories constitute the most vola­
tile type of spending in the economy. R apid and sizable
shifts between inventory accumulation and liquidation

inventory movements in periods of general business con­
traction in the two postwar recessions apparently has been
even greater than during the interwar years. In the 1 9 4 9

have, in fact, been so characteristic of shorter business

downturn, a shift from inventory accumulation at an
annual rate of 3 V2 billion dollars to liquidation at a rate
of 5 billion represented virtually the entire contraction in

cycles that these fluctuations in over-all activity are fre­
quently referred to as “ inventory cycles” . W hile such
swings in inventory accumulation tend to reflect, rather

national output,2 while a similar shift accounted for about

than cause, more fundamental changes in underlying eco­

three quarters of the decline which occurred in 1 9 5 3 - 5 4 .

nomic conditions, most economists agree that the rate of

A steep fall in the rate of inventory growth also accom ­

investment in stocks is one of the most significant “ triggers”
of turning points in economic activity and is also an impor­
tant determinant of the extent of the swings in production

panied the marked slackening in the rate of growth of
G N P in 1 9 5 1 - 5 2 , although G N P did not actually decline
at that time. Th e relative significance of inventory build­

and employment. Th e outlook for inventories is of par­

ups in periods of rising G N P , on the other hand, has con­

ticular interest at the present moment, in view of the pro­
longed expansion in aggregate stocks since the beginning

siderably diminished in the postwar period, although such
build-ups have continued to be of considerable importance

of 1 9 5 5 and its possible implications for the continuation

in the earlier stages of recovery, as at the beginning of

of the current business expansion.

1 9 5 0 and of 1 9 5 5 .

T he Im portance

of

In v e n t o r y C hanges

in

B u s in e s s C y c l e s

E x p l a n a t io n s

of

I n v e n t o r y B e h a v io r

A study by the National Bureau of Econom ic Research

The behavior of business inventories m ay be explained
principally by reference to two m ajor factors: ( 1 ) the ratio

has concluded that in most of the business cycles that

of inventories to sales (or output) which businessmen

occurred during the two interwar decades ( 1 9 1 9 - 3 8 ) , the
amount of inventory investment— i.e., the rate at which
businessmen were adding to or drawing on their stocks—
exhibited greater fluctuations than any other major cate­
gory of expenditures.1 A lm ost a third of the total cyclical
fluctuation in “ real” gross national product ( G N P adjusted

attempt to maintain; and ( 2 ) their success in maintaining
this ratio. Inventory objectives and the degree of precision
with which they can be realized m ay, of course, vary
widely from industry to industry, from commodity to com ­
2 Or about two thirds of the decline, if the end of the contraction
is placed before rather than after the steel strike of October 1949-

to exclude the effects of price changes) over these twenty
years was found to have reflected alternating shifts between
inventory accumulation and liquidation. A further impor­
tant finding was that the role of inventory changes,
although significant during both expansions and contrac­
tions, was relatively much greater in contractions. During
the expansions, the stepping-up of the pace of inventory
building amounted, on the average, to less than a quarter
of the total gains in output from cyclical troughs to peaks;
but in recessions the shift from accumulation to liquida­
tion represented nearly half of the declines.
While data that would permit a comparable analysis of

FEDERAL RESERVE OPERATIONS IN THE MONEY
AND GOVERNMENT SECURITIES MARKETS

Th e publication of the booklet, Federal Reserve
Operations in the Money and Government Securities
Markets, which w as announced in last month’s
Review, has met somewhat greater demand than had
been anticipated. T h e original printing is now virtu­
ally exhausted. Additional copies will be available
for bulk distribution, free of charge, early in N ovem ­
ber. Requests for copies will be filled as promptly

the postwar period have not been published, the available

as possible.

figures do seem to indicate that inventory behavior since

which operations are conducted through the B an k ’s

This booklet discusses the manner in

W orld W ar II has in most respects conformed to a similar

Trading Desk

pattern, notwithstanding the distortions in the course of

the Federal Open

business activity introduced by the K orean w ar and by the

should be addressed to the Publications Division,

steel strikes in 1 9 4 9 , 1 9 5 2 , and 1 9 5 6 . Th e importance of

Federal R eserve B an k of N ew Y o rk , N ew Y o rk 4 5 ,
N ew Y o rk .

1 Moses Abramovitz, Inventories and Business Cycles, National
Bureau of Economic Research, 1950.




in carrying out the directions of
M arket

Committee.

Inquiries

144

MONTHLY REVIEW, OCTOBER 1956

by making certain assumptions about the nature of inven­

tions regarding the prices and availabilities of raw mate­
rials. E a rly this year, for example, m any producers of

tory goals and the extent to which they can be achieved,

consumer durables were building up their steel inventories

a considerable measure of understanding of inventory be­
havior m ay be gained.

in expectation of a price rise and possible strike, although
they were at the same time reducing their output of

modity, and from one period to the next. Nevertheless,

Probably the simplest such assumption is that business­

finished goods.

In some industries where goods m ay be

men desire and are in fact able to maintain stocks in some

stored for long periods between one processing stage and

constant proportion to sales (or o u tp u t). O n this assump­

the next (e.g., tanning), even stocks of goods under fabrica­

tion, inventory behavior will be governed by what is tech­

tion m ay vary quite independently of output.4 Despite

nically termed the ‘ ‘acceleration” effect, first applied to
inventories by J . M . C lark in 1 9 1 7 . 3 Th e acceleration

these influences, however, it seems likely that changes in
the rate of output still are most often the major deter­

principle asserts that the extent to which businesses add

minant of changes in raw materials and in-process inven­

to (o r draw on) their stocks is determined by the amount

tories, so that for these stocks the acceleration effect would
be expected to apply without major modification.

that sales increase (or decrease) in successive periods.
(In the case of stocks that a firm does not intend to sell but
uses in production— i.e., purchased materials or goods in

However, for much of the two thirds of total inventories
that consists of stocks of goods for sale, the assump­

process— the relevant relationship is between inventories

tion that the stock/sales ratio can be held constant is

and output rather than sales.) Thus, when sales advance
by a larger amount in one month than in the preceding

unrealistic. W ith the exception of items for which there
are specific and guaranteed orders from particular cus­
tomers, the rate of purchasing on the part of retailers and
wholesalers, and of output by manufacturers, must neces­

one, business firms will also increase the rate of inventory
accumulation, accentuating the business upturn.

W hen

sales are falling more rapidly over a given interval than

sarily depend on their anticipations as to what customers

during the previous one, the rate of inventory liquidation

will want to buy. Th e inherent uncertainty of predictions
of demand makes it virtually inevitable, however, that
m any if not most of these forecasts and judgments will
be somewhat wide of the mark. Alm ost unavoidably,
therefore, inventories of goods for sale are rarely at the

will also be speeded up, accentuating the business decline.
A striking corollary of the acceleration effect is that, when
gains in sales become smaller— although total sales con­

tinue to rise— firms will make smaller additions to inven­
tory, and as a result even total ordering (or production)
m ay turn down. Conversely, when sales are falling, a
slackening in the amount of decline— though sales are still
on the downtrend— will lessen the need to reduce inven­
tories and will contribute to an upturn in total ordering.
Consequently, if not offset by other factors, a decline in
the rate at which aggregate sales are growing m ay touch
off a general contraction in production, while a decline in
the rate at which sales are falling m ay lead to a general
recovery.
Th e assumption that business firms maintain a fairly
constant stock/output ratio seems to describe fairly accu­
rately the w ay in which manufacturers manage inventories
o f materials to be processed in their own plants (although
unforeseen changes in output and other factors m ay give
rise to intermittent departures from stock/output objec­
tives). Such stocks currently amount to more than a third
of total inventories.

O f course, while businessmen m ay

tend to maintain their holdings of raw materials and goods
in process close to target levels, they do at times revise

target ratio which businessmen had sought and would con­
sider most desirable.
W hen the possibility of these involuntary departures
from inventory goals is taken into account, it can be
shown, by a detailed economic analysis beyond the scope
of this article, that the corrective reactions of business
firms in stepping up or curtailing output in response to
such influences m ay, through their repercussions on em­
ployment and incomes, be sufficient to bring about cyclical
fluctuations affecting the entire econom y.5
Th e experience of the automobile industry with the 1 9 5 5
and 1 9 5 6 models illustrates in some respects the w a y in
which largely unavoidable errors in sales forecasts become
reflected first in unforeseen inventory changes and then
in production adjustments that react on economic activity
at large. Th e new 1 9 5 5 models, introduced at a time when
the economy was just emerging from a mild recession, were
accorded an unexpectedly favorable reception.

Produc­

tion was immediately stepped up in response, spurring on

4 Ruth P. Mack, Consumption and Business Fluctuations: A Case
Study of the Shoe, Leather, Hide Sequence, National Bureau of
level of stocks in relation to output. F o r the most part,
Economic Research, 1956, provides a detailed study of the differing
determinants of inventory behavior in industries with diverse produc­
these shifts probably are caused by revisions in expectation and marketing patterns.
5 Lloyd Metzler, "The Nature and Stability of Inventory Cycles” ,
3 "Business Acceleration and the Law of Demand: A Technical
Review of Economic Statistics, August 1941.
Factor in Economic Cycles” , Journal of Political Economy, March 1917.

their view as to what constitutes a necessary or desirable




FEDERAL RESERVE BANK OF NEW YORK

145

the general economic recovery; but the pace of automobile
sales also quickened more than seasonally so that, despite
capacity output, inventories remained unintentionally low
in relation to sales until well into the spring of 1 9 5 5 . A fte r
the usual seasonal swings in output and inventories result­
ing from the annual model change-over, the industry re­

A s indicated earlier, involuntary or undesired changes
in inventories would be expected to occur principally,
although by no means exclusively, in holdings of finished
goods. This is true particularly of holdings of finished
durables, since purchases of such goods, being to a large
extent postponable, fluctuate more capriciously than other

sumed peak assembly rates in the fourth quarter of 1 9 5 5 ,
apparently on the assumption that sales of the 1 9 5 6 models

buying. If analyzed in combination with indicators of out­
put and sales, the behavior of some types of finished goods

would follow the pattern of the previous year. However,
sales instead fell sharply behind the 1 9 5 5 rate, bringing

inventories held in manufacturing and trade often permits

about an unintended and undesired build-up in new car
stocks. A s a result, production had to be drastically cur­
tailed to a rate substantially below sales for the rest of the
1 9 5 6 model run, compelling sizable layoffs of workers in
the automobile industry and among its suppliers.
Thus, by and large, apart from sheer excesses of specu­
lation, the instability of inventories as a factor in triggering
cyclical turns, or in accentuating cyclical swings, arises in

a diagnosis as to whether current movements are largely
intended or unintended. F o r example, if sales and output
are expanding but finished goods inventories are declin­
ing, involuntary liquidation m ay be in progress. If inven­
tories are growing in the face of declining sales and output,
on the other hand, the accumulation of stocks m ay be
unwanted.
Because of these involuntary fluctuations in finished
goods stocks, it is to be expected that turning points in

two principal ways. First, there is the so-called accelera­

the level of such inventories would tend to lag behind

tion relationship which applies most clearly to the one
third of all inventories that vary rather directly with output

turning points in sales.

or sales. Second, there is the effect of attempting to cor­
rect for involuntary changes in inventories, a possibility

Stocks continue to accumulate

(involuntarily) for some time after sales have turned down,
and are liquidated (involuntarily) for some time after sales
have turned up. Turning points in inventories of other than

that is dominant through the two thirds of business in­
ventories that consists of the finished goods of m anufac­

finished goods, in which involuntary fluctuations are likely

turers and the stocks of the wholesale and retail trades.

cide more closely with those in sales.

The effects on aggregate activity of these built-in tenden­

study cited earlier has verified to the extent permitted by

cies toward fluctuation are, of course, mitigated by the vast
variety of the nation’s product m ix which much of the

the limited data that these relationships did in fact prevail

time provides several adjustments in one direction to
offset those occurring elsewhere in the opposite direction.
It is the problem of observing and appraising the patterns,
of judging the likelihood of balancing offsets or of a cumu­

to be smaller and less frequent, would be expected to coin­
Th e Abram ovitz

during the interwar period. Furthermore, as m ay be seen
in the chart, which plots sales of durable goods against
inventories of durable finished goods at all levels of dis­
tribution, the lag between sales and inventories of such
goods has apparently continued to operate in the postwar

lative spiral, that must occupy much of the attention of
those who attempt to visualize the “ business outlook” .
SALES AND INVENTORIES OF FINISHED DURABLES
St a t is t ic a l

E v id e n c e

Quarterly averages of monthly figures, 1948-56
Billions of dollars
Billions of dollars

While statistics alone can never distinguish between
voluntary and involuntary inventory changes, breakdowns
of the aggregate inventory figures have been developed that
do provide some guidance in this regard. Th e Department
o f Com m erce publishes monthly estimates of the book
value of inventories held by manufacturers, wholesalers,
and retailers, showing breakdowns for durables and non­
durables, as well as by several industry classifications.
F o r manufacturers, furthermore, the inventory total is re­
fined into three additional subcategories: purchased mate­
rials, goods in process, and finished goods ready for sale.
(N o such further breakdown is needed for wholesalers and
retailers; virtually all their stocks are presumed to consist
of goods ready for sale.)




# Data for 1948-50 are not exactly comparable to later figures.
Source: United States Department of Commerce.

MONTHLY REVIEW, OCTOBER 1956

146

period. Alm ost every turning point in durable goods sales
over the

8 V2

industrial production— a time when most other important

years covered by the chart has preceded by

categories of stocks (as well as stocks in the aggregate)

one or more quarters a similar turnabout in finished goods

were still decreasing. Retail inventories began to advance

inventories. The evidence concerning the timing of turns

at the turn of the year, but the rise initially reflected almost
entirely the build-up in new car stocks as the automobile

in inventories of finished nondurables and of other-thanfinished goods during the postwar period is less clear-cut,

industry attempted to bring inventories into line with the

but seems in general also to accord with theoretical

unexpectedly high rate of sales. T h e broad inventory up­

expectations.

swing did not begin until A p ril 1 9 5 5 , when manufacturers’
holdings of purchased materials, wholesalers’ stocks, and
R

ecent

I n v e n t o r y B e h a v io r

nonautomotive retail holdings also turned upward. M anu­

Th e recent period of business expansion has been accom ­

facturers’ holdings of finished goods, in accord with pre­

panied by a substantial growth in inventories, with sea­

vious experience, were the last m ajor category of inven­

sonally adjusted book values increasing in every month

tories to rise; these stocks did not expand significantly
until the third quarter of 1 9 5 5 .

since the beginning of 1 9 5 5 .

Th e total addition to book

value over the period amounted to 9 billion dollars, or
more than 1 0 per cent.

Th e major part of the increase

resulted from physical addition of goods to stockpiles,
while about a third reflected higher replacement costs.
In broad terms, the variations in growth rates of aggre­

Th e subsequent record is more difficult to interpret,
since a large and growing proportion of the expansion in
inventory values after the summer of 1 9 5 5 has reflected
higher prices rather than increases in physical quantities.
It would appear, however, that between the latter part of

gate stocks as well as of their m ajor constituents appear

1 9 5 5 and m id-1 9 5 6 the growth of stocks of finished dura­

to have conformed fairly closely to the patterns outlined

bles held by both producers and distributors has slowed

above.

considerably or been replaced b y liquidation; this is true
even if retail automobile stocks are excluded. The expan­

A s in previous business expansions, the rise in

stocks did not begin until several months after the upturn
Once the expansion in stocks had

sion in the volume of goods in process probably also has

begun, at the beginning of 1 9 5 5 , it proceeded at first less

slackened somewhat, in real terms, reflecting the levelingoff in factory output. On the other hand, nondurable finished

in aggregate output.

rapidly than the advance in business sales. Th e inventory
growth soon accelerated, however, and by the fall of 1 9 5 5

goods— such as textiles, petroleum, paper, and possibly

was already outpacing the sales advance. W hen total sales
subsequently leveled off in late 1 9 5 5 and early 1 9 5 6 , the

chemicals— v/ere piling up much more rapidly, while
stocks of raw materials increased swiftly in the months
preceding the steel strike.

inventory accumulation continued and in fact temporarily
speeded up, reflecting in part the “ involuntary” growth of
stocks of such items as automobiles and appliances. Since
M arch 1 9 5 6 , however, the rise in book value of inventories
has slackened and in Ju ly was brought almost to a halt
by the steel strike. During these months, inventories
appeared to be undergoing a “ rolling readjustment” . Out­
put in industries with overextended inventory positions,
notably the automobile industry, was curtailed, and accu­

A s noted above, the rate of inventory accumulation has
slowed substantially in the past few months; indeed, it
would not have been possible for the rapid rate of accu­
mulation since early 1 9 5 5 to have been sustained indefi­
nitely. M ost recently, there m ay in fact have been actual
liquidation in the physical volume of stocks, due to the
interruption of steel production, the further reduction of
retail automobile inventories (which had built up to record

mulation turned to liquidation. T h e effects of such liqui­

heights early this y e a r), and scattered output curtailments

dation were moderated, however, by the more rapid expan­

in other lines, such as textiles. H ow ever, in m any of the

sion of stocks in other lines. In some of these industries,

industries where stocks had earlier become overextended,

notably in capital goods, producers still were attempting

they are now reported to have been reduced almost to the

to catch up with rising demand, while in others, such as

desired levels.

textiles, some firms m ay have experienced involuntary

aggregate inventories is therefore a distinct possibility.

accumulations.

A

resumption of more rapid growth in

Prior to the steel strike, the widespread

H o w long renewed growth could continue depends in

stockpiling of steel also provided a major offset to the

large measure on whether such growth would be balanced

liquidation of other types of holdings.
Th e types of goods that were being added to inventories
changed considerably as the business upswing progressed.

and in line with sales, rather than being motivated by
expectations of higher prices.

Since such expectations

are often subject to sudden reversal, particularly abrupt

Inventories of goods in process, for example, started to

shifts from accumulation of inventories to liquidation m ay

expand in the fall of 1 9 5 4 — coincident with the upturn in

occur when accumulation has depended to an important




14?

F E D E R A L R E SE R V E B A N K OF N E W Y O R K

extent on speculative motives. These shifts, in turn, are
prone to touch off cumulative forces leading to recession
in the economy at large. A t the same time, however, it
should be recognized that some moderate growth in inven­
tories over the long run is to be expected and is, in fact,

in moderating rapid shifts in the rate and direction of inven­
tory investment and in combating their unsettling conse­
quences. T o the extent that policy succeeds in averting
or cushioning wide and too rapid fluctuations in incomes
and employment, and hence the accom panying swings in

essential to a growing economy.

demand and prices, the sudden and sharp reversals in inven­
tory movements that have aggravated cyclical turns in the

I n v e n t o r ie s

and

E c o n o m i c P o l ic y

past also are likely to be moderated. A t the same time,

Fluctuations in inventories are unavoidable in our com ­

monetary policy m ay also help to restrain excessive inven­

plex economy in which business production and purchasing

tory expansions which stimulate economic activity to unsus­

decisions must seek to anticipate frequent variations in

tainable peaks, and can be effectively used to prevent

prices and demand, which at best can be only imperfectly
foreseen. Nevertheless, economic policy can play a part

credit stringencies that might provoke distress liquidation
of inventories in recession.

MONETARY CONTROL IN A RAPIDLY DEVELOPING ECONOMY:
THE NEW ZEALAND ROYAL COMMISSION REPORT
A broad-scale public inquiry into the monetary problems

ployment of labour, ensuring the healthy development of

of a rapidly developing economy has recently been con­

natural resources, and promoting generally the economic,
financial, and social welfare of the people of N e w Zealand” .

cluded in N ew Zealand. A s is traditional in the British C om ­
monwealth countries, the inquiry was conducted by a R o yal
Commission appointed by the government on a nonpolitical

Accordingly, it was to investigate and report on: “ (a) any
monetary, banking, and credit proposals that m ay be sug­

comparable in m any respects to the reports of similar

gested as suitable for application in N ew Zealand; (b) the
present monetary, banking, and credit system in N ew

commissions in the past, such as those which in Canada

Zealand and the advisability or otherwise of any changes

in 1 9 3 3 dealt with the question of establishing a central

in that system; and (c) any associated matters which should

bank, in N ew Zealand in 1 9 3 4 and A ustralia in 1 9 3 6 - 3 7
with the improvement of the monetary framework and

be deemed . . . to be relevant to the general objects of the
inquiry” .

instruments, and in Britain in 1 9 3 1 (the M acm illan C om ­

The commission itself was composed of six distinguished
N ew Zealanders selected from various parts of the country

basis. The commission’s report1 is an important document,

mittee) with the broader problem of fostering domestic
adjustments to fundamental changes in the world economy.

and from various professions. Th e chairman was a judge

These earlier reports analyzed the economic and financial
issues of the day, recommended policies for dealing with

of the labor Arbitration Court; the other members included
a barrister, a public accountant, the managing director of
the Farm ers’ Co-operative Organization Society, the gen­
eral manager of a business firm, and the managing editor
of a daily newspaper. Heading the commission’s staff were
the chief of the economic research branch of the N ew
Zealand Treasury and a senior lecturer in economics from

them, and contributed greatly to a better understanding
by the public of the com plex problems facing the monetary
authorities. Lik e its forerunners, the report of the N ew
Zealand R o yal Commission m ay well exert a profound
influence on the evolution of central banking and monetary
policy in N ew Zealand.

Victoria University College, Wellington.

Hearings were

held over a five-month period in 1 9 5 5 in Wellington and
T he R

oyal

C o m m is s io n

other principal cities of N ew Zealand.
cluded individuals who

The R o yal Commission on M onetary, Banking, and

Witnesses in­

appeared at the commission’s

request (m ainly government officials and representatives

Credit Systems was established by the N ew Zealand G o v ­

of banks and insurance com panies), as well as others

ernment on M arch 16 , 1 9 5 5 . Its terms of reference were

whose testimony was given on their own initiative, while

broad since it was to concern itself with “ fostering a

written statements were also received from both official

greater degree of stability in prices, maintaining full em­
1 Report of the Royal Commission on Monetary, Banking, and
Credit Systems, Wellington, New Zealand, 1956.




and private sources. Little more than a year after it had
been established, the commission submitted its 500-p age
final report, signed by all its members without reservations.

MONTHLY REVIEW, OCTOBER 1956

148

T he M

onetary

Problem

in

N e w Z ealand

over the substantial changes in incomes of producers and
exporters that are induced by wide fluctuations in overseas

In keeping with its objectives, the commission devoted
considerable attention to the analysis of inflation in N ew

prices.

Zealand.

M oreover, the problem of monetary control is

Th e commission’s report attributes these infla­

greatly complicated when— as has been too frequently the

tionary strains mainly to the country’s rapid population

case in N e w Zealand since the w ar— “ the governments

increase, a rise in overseas prices for its exports and imports,
an excess of capital expenditures over voluntary savings,

have permitted, and through tax reductions have even
encouraged, unduly high domestic spending” .

heavy government expenditures during W orld W ar II
for military purposes and subsequently for social security

Additional limitations lie in the structure of the banking
system. Th e system itself is relatively simple, consisting of

and other programs “ com m only associated with the W el­
fare State” , wage and salary increases, and finally the

only five commercial banks with branches throughout the

expansion of the money supply resulting from greatly

central bank difficult. Th e operations of one of the five com ­

increased bank lending.
The inflationary pressures thus created have brought

years has handled 4 0 per cent of the country’s banking busi­

about balance-of-paym ents difficulties which, the report

ness and is government owned— have not always been

notes, had led to the imposition of import and exchange
controls as early as Decem ber 1 9 3 8 . These controls were

Reserve Ban k of N ew Zealand. O f the other banks, three

country; but certain of its features render control by the
mercial banks— the Ban k of N e w Zealand, wiiich in recent

closely coordinated with the policy of the central bank, the

tightened after the beginning of the w ar and were bolstered
by an anti-inflationary fiscal policy and other measures

have their head offices in other sterling countries, thus m ak­

that did much to curb the upward pressure on prices. M an y
of these measures remained in force in the early postwar

the absence of a money market in N ew Zealand and the

years, with the result that “ compared with other countries

of open market operations as an instrument of control. In

N ew Zealand was very successful in restraining price in­

these circumstances, according to the commission, “ the

creases between 1 9 3 9 and 1 9 4 8 ” . Thereafter, however,

most that can be expected from the monetary, banking, and

prices began to rise more steeply as the incomes of N ew
Zealand wool growers were swollen by high overseas prices,
private investment outran voluntary savings, and the w ar­

credit systems is that they should certainly not aggravate”
these economic, financial, and institutional difficulties, and
that “ they should be capable of being used to assist in the

time stabilization programs were discontinued. W ith the

economic adjustments which are necessary to enable society

ending of the commodity boom that followed the Korean

to reap the benefits, while countering any drawbacks, of

outbreak, these inflationary strains declined perceptibly,

technical and economic changes” .

only to rise again in 1 9 5 5 . Summing up N ew Zealan d’s eco­
nomic position in 1 9 5 5 , the commission pointed out that
exporters’ incomes were buoyant, capital investment was
at a high level, vacancies in industry exceeded the number
of persons seeking work, and there was “ confidence in
future prospects” . Since the mid-thirties, in short, the coun­
try’s outlook had “ changed from depression to prosperity,
from severe unemployment to overfull employment, and

ing for easy access to overseas money markets. M oreover,
thinness of the capital market make impracticable the use

Within these limitations, the commission found that the
N ew Zealand monetary authorities are on the whole ade­
quately equipped to perform their task. The Reserve B an k
of N e w Zealand possesses the rediscount, open market,
and reserve requirement instruments for credit control.
There is no ceiling on the level to which reserve require­
ments m ay be increased, but they m ay not be reduced be­
low 7 per cent of demand deposits and 3 per cent of time

from deflation to inflation” .

deposits; all changes require the consent of the M inister of
T he F ram ew o rk
M

and

onetary

In str u m e n ts

of

P o l ic y

Finance. Other controls are exercised directly by the gov­
ernment, which has for m any years restricted to a low level

Th e central questions to which the commission ad­

the commercial banks’ holdings of government securities;

dressed itself were whether the authorities possessed ade­

in addition, the overdraft rates have long been controlled

quate monetary control instruments, whether the existing

by

instruments had been used as effectively as possible, and

mercial banks.

whether any changes in these instruments or in their use

ownership of the Ban k o f N ew Zealand could, in the opin­

were desirable. A t the outset, the commission recognized

ion of the commission, “ reinforce its general policy as

certain limitations under which the monetary authorities

regards bank lending, and influence bank charges b y spe­

had to operate. N o matter how refined their monetary in­

cific instructions” to that institution. Equipped with these

struments, the authorities, in an econom y as dependent on

various powers, the monetary authorities accordingly have

foreign trade as N ew Zealand’s, can exercise little control

“ far reaching powers to curb unwanted bank lending” .




agreement between the government and the com ­
M oreover, the government through its

FEDERAL RESERVE BANK OF NEW YORK

Indeed, the Reserve B an k ’s powers unaided could “ be
used . . . to make an unwanted expansion of advances com ­
pletely unprofitable to the banks and to provide them with
a direct financial inducement to keep advances within
desired limits” .

R

ecent

M

onetary

P o l ic y

149

Requirements were raised in several steps, from the 7 and
3 per cent minima, until in M a y 1 9 5 3 they stood at 2 0 per
cent against demand deposits and 1 0 per cent against time
deposits. Nevertheless, commercial bank balances at the
R eserve Bank, augmented by substantial surpluses in the
balance of payments, remained well above the required
ratios, averaging no less than 3 9 per cent of total bank
deposits during 1 9 5 3 . “ Y e t despite the large amounts o f

Th e conclusion that the authorities possessed adequate
instruments for monetary control led to the further ques­

minimum reserve ratios were not raised again until the

tion whether these instruments had been effectively used.

end of M a y 1 9 5 4 ” , while the discount rate remained un­

In answering this question the commission reviewed N ew
Zealand’s recent monetary experience, dividing it into four
periods that coincided with the m ajor changes in the
Reserve B an k ’s credit policy. Th e first period included
roughly the three years ended in M arch 1 9 5 2 . This
was a period of sharp inflationary pressures, during which
commercial bank advances more than doubled. W hile this
expansion was partly attributable to factors beyond official

free cash in the hands of the banks” , the report states, “ the

changed at IV2 per cent. Th e money supply accordingly
continued to expand, domestic prices rose despite de­
clining import prices, and the labor market remained tight.
Summing up its findings in regard to this period, the com mission stated that “ in our opinion, a firmer policy should
have been adopted in the latter part of 1 9 5 3 , e.g., by
reducing the margin of free cash available to the banks
to a very low level and indicating that the reserve ratios

control, the commission found that it was also partly due

and the interest rate for borrowing from the R eserve B ank

“ to the failure of the monetary authorities to make use of

would be raised speedily and considerably if advances

the reserve ratio[s]” , which remained at their legal minima

increased to any significant extent” .

until after the end of the period. M oreover, the Reserve
B an k ’s discount rate had remained unchanged at the IV2

1 9 5 5 , inflationary pressures again increased. The Reserve

per cent level at which it had been set in Ju ly 1 9 4 1 .

B ank accordingly tightened its monetary policy further by

Indeed, the Reserve Bank, according to the commission,

squeezing the banks’ “ free cash” and also by raising the
cost of borrowing at the central bank. Th e R eserve B an k’s

did not “ appear to have recognized the need for imposing
restraint” until the autumn of 1 9 5 0 , and even then it

In the third period, covering the year ended M arch

merely asked the commercial banks “ to adopt a cautious

discount rate w as raised by 2 per cent to
in Ap ril
1 9 5 4 , and to 4 per cent in Novem ber 1 9 5 4 . A t the same

attitude to all requests for increased accommodation” .

time, reserve requirements were so adjusted during the

This request was subsequently bolstered by other restraint

winter of 1 9 5 4 - 5 5 that the “ free cash” balances of the four

measures under the so-called selective advance-control

private commercial banks were “ substantially reduced” .
M oreover, the government-owned B ank of N ew Zealand

policy, in accordance with which certain priorities have
been set by the government for the granting of bank credit.
However, as the commission noted, it was not until Decem ­
ber 1 9 5 1 that the banks were advised that the reserve ratios
were to be raised, and the first increase was not made until
August 1 9 5 2 . Assessing the government’s policy in this
period, the commission commented that “ the monetary

was in debt at the Reserve Bank during most of the year
ended M arch 1 9 5 5 , although for special reasons part of its
borrowings was interest free. Nevertheless, the expansion
of bank credit continued, and this occurred despite the
fact that, in the opinion of the commission, “ external

authorities were slow to appreciate the need of restraining

factors were not exerting an inflationary influence” . The
banks’ advances rose 1 5 per cent between M a y and

bank advances” . M oreover, the authorities were “ unwise”
to rely on the policy of selective advance control because

October 1 9 5 4 , and after a brief period of stabilization
began to expand again in M arch 1 9 5 5 . Summing up, the

the commercial banks had “ substantial excess cash reserves

commission found that “ the narrowing of the margin of

[and] were confronted with a very strong demand for

free cash and the raising of the Reserve B an k ’s lending

advances from credit-worthy borrowers for purposes which

rate in the second quarter of 1 9 5 4 did not have any

were not (at least until the end of 1 9 5 1 ) inconsistent”

restraining effect on lending by the trading banks” .

with the selective controls.

Th e persistence of inflationary strains during the nine

In the second period— roughly the two years ended

months ended Decem ber 1 9 5 5 — the final period analyzed

M arch 1 9 5 4 , during which external inflationary pressures

by the commission— prompted a further tightening of the

on the N ew Zealand economy were subsiding— the Reserve

Reserve B an k’s monetary policy. Reserve ratios were ad­

Bank brought the reserve requirements into play in order

justed so as to force the commercial banks as a whole to

to place itself in a better position to control bank credit.

borrow at the central bank in order to maintain the re­




MONTHLY REVIEW, OCTOBER 1956

150

quired level of reserves. A statement of the governor of

additional income made by the banks on their higher

the Reserve Bank in October 1 9 5 5 , when the reserve

advances . . . E v e n allowing for any consequential in­

requirements for demand deposits were raised to 2 4 per

creases in administration expenses, and loss of income due

cent, indicated that the authorities’ aim was to keep the

to sales of sterling, the banks’ additional earnings obviously

banks as a whole “ in the red” to the extent of about 1 2

greatly exceeded the interest payments made to the Reserve
B an k.” Th e Reserve B an k ’s policy, in the opinion of the

million pounds, equivalent to about one fifth of their re­
quired reserves at that time. A t the same time, the Reserve

commission, would have had a restraining influence only

Ban k raised its discount rate in three steps to 7 per cent

in the exceptional case in which a single bank that was

in October 1 9 5 5 from the 4 per cent rate established the

just meeting its minimum reserve requirements was ex­

previous Novem ber.
These measures were accompanied by rather notable

panding its lending while the lending of other banks was

changes in monetary trends. Apparently with the aim of

“ would certainly be penalized” . However, the commission

not increased. In these circumstances the expanding bank

reducing their indebtedness at the Reserve Bank, the com­

apparently felt that this was not the situation in Newr

mercial banks sold an exceptionally large amount of ster­
ling to that bank. “ Though they thus escaped payments

Zealand where the relatively few, big banks more or less
kept pace with each other in the general expansion of

of interest to the Reserve B an k ” , the commission found

lending.

that the commercial banks “ had to forego the interest

cluded, “ the banks are not automatically penalized if they

In these circumstances, the commission con­

which might otherwise have been earned on short-term

are forced to borrow from the R eserve B an k to maintain

investments overseas” and were thus indirectly penalized

their statutory reserve requirements as a result of an ex­

by the stringent reserve requirements. F o r the same rea­

pansion of their advances. This is so even if the minimum

son, some of the commercial banks also borrowed over­

reserve ratios are fairly high and the rate of interest

seas, although the amount, in the opinion of the commis­

charged to the banks by the Reserve Ban k is higher than

sion, did not seem “ abnormally high in comparison with

the rate of interest which the banks can obtain on their

previous years” .

accompanied the Reserve B an k ’s stringent measures was

advances.”
W hile critical of the conduct of the official monetary

the 7 per cent decline in commercial bank advances during

policy and dubious about its effectiveness in recent years,

the nine-month period, the reduction being achieved, as

the commission found that “ inadequate support from other

the commission noted, “ in the face of strong pressure for

policies has been an important element in the lack of suc­

accom m odation” .

cess in controlling advances . . . Inflation cannot be effec­
tively fought on one front alone.” In particular, support

A

Pr o blem s

more important development that

of

M o netary C ontrol

While the commission regarded this reduction of com ­
mercial bank advances as gratifying, it expressed some
doubts about the extent to which this change could be
attributed to the Reserve B an k ’s policy of putting the trad­
ing banks “ in the red” . These doubts stemmed partly from
the special position of the B an k of N ew Zealand which,
because it handles certain government business in various
parts of the country, was permitted a specified amount of
interest-free borrowing at the central bank.

Although it

was not given by the government’s fiscal policy. Although
the use of budgetary policy to restrain inflationary pressure
had been recognized in successive issues of the official
Economic Survey, the government “ has not in fact made
sufficient use of its power to restrain private expenditure
in an inflationary period by collecting more from the pub­
lic, by taxation and borrowing, than it pays out. Govern­
ments have, throughout the postwar period, been too ready
to grant taxation concessions which economically were in
all the circumstances inadvisable.” M oreover, insufficient

held relatively large amounts of overseas funds, the B ank

attention had been paid, in the opinion of the commission,

of N ew Zealand nevertheless borrowed continuously “ quite

to the inflationary effects of some types of nonbank credit,

large amounts from the Reserve B an k ” , which in the opin­

especially as regards housing. In this field, the program of

ion of the commission “ had the rather anomalous effect of

the authorities had “ tended to frustrate the government’s

preventing the intended measure of restraint on lending

anti-inflationary policies, either by reducing the overall

from operating with full force on the other [commercial]

budget surplus achieved, or at times by necessitating re­

banks. Thus the policy of the State-controlled bank oper­

course by the government or by the State A dvances C o r­

ated, in the circumstances, to shield the private banks.”

poration to the banking system for finance” .

Furthermore, the commission noted that, although the
amount of borrowing by the commercial banks from the

T he

C o m m is s io n ’s R e c o m m e n d a t io n s

Reserve Bank was relatively large, “ the actual interest

In the field of monetary policy, the commission’s prin­

paid by the banks has been small in relation to the

cipal recommendations were that the authorities, in con­




FED ER AL RESERVE B A N K

OF N E W Y O R K

151

sultation with the trading banks, should periodically assess

the grounds that the proceeds are to be used to reduce or

the level of bank credit appropriate for the short-term

repay bank overdrafts, that direct controls over capital

future and, while allowing scope for competition between

transfers overseas be maintained, that the government

the banks, should give them “ a direct financial incentive to

avoid frequent variations of exchange rates as a method of

cooperate” in the achievement of the official target. The

balance-of-payments adjustment, and that N ew Zealand

banks, said the commission, would: “ be informed that, for

seek membership in the International M onetary Fund and

every £ 1 million by which advances exceeded the target

the International Bank.

level fixed for a particular date, the ratios would be raised
to put the banks into debt at the Reserve B ank to the extent
of £ 1

million.

To

avoid unduly conservative lending

C o n c l u d in g

R em arks

policies by the banks, it might be desirable to fix two

The commission’s recommendations have not failed to

rates of interest for borrowing from the Reserve Bank.

provoke debate in N e w Zealand. In particular, the question

One would apply to extensions of credit slightly above

has been raised whether the proposal for a target level of

the desired level and would be fixed at such a figure that

advances goes to the root of the country’s monetary diffn

the banks made neither profit nor loss by expanding

culties, and whether the inquiry has not neglected some

credit to that extent.

The other, a penal rate, would be

factors that have contributed to the banking system’s slow

applied after this margin of tolerance had been exceeded.”

response to monetary policy. M ore specifically, it is ques­

In accordance with this suggestion, the commission recom­

tioned whether sufficient emphasis has been placed on: (1)

mended that the authorities be prepared to vary reserve

the elasticity of the commercial banks’ cash balances, which

requirements “ quickly and resolutely in order to make

can be augmented by loans from head and other offices

them effective” , and that no ceiling be placed on the level

overseas; (2) the fact that the volume of bank loans depends

However, if

on the borrowers’ initiative so long as overdraft limits

the requirements were “ fixed at very high levels, it might

exceed actual advances; and (3) the difficulties of branch

to which the requirements could be raised.

sometimes be equitable to allow the banks’ interest on part

managers in making quick readjustments in thousands of

o f the balance which they are required to keep at the

overdraft limits, especially as regards important customers.

Reserve Bank, or to permit them to take up Treasury bills

Finally, the report, having cast doubts on the efficacy of

held by the R eserve B an k ” . In addition, the commission

monetary policy in bringing about the decline in advances

recommended increased use of the commercial banks’ over­

during 1 9 5 5 , offers no alternative explanation for the

draft rates, especially in order to strengthen the selective

change in monetary trends.

advance-control policy.

“ Th e banks should be permitted

It is clear, however, that the N e w Zealand inquiry has

to fix rates of interest on overdrafts within a fairly wide

served many useful purposes.

range, on the understanding that the average rate of inter­

has gathered a large amount of valuable information

Th e commission’s report

est charged will be at a level deemed desirable by the

not heretofore available about the N e w Zealand economy.

authorities.” It also recommended that, if an effective sys­

Its hearings and report have stimulated public interest in

tem for controlling the aggregate of the banks’ assets were

the country’s difficult monetary problems. Th e commission

adopted, “ the banks should be allowed to invest in Govern­

itself, moreover, has made many thought-provoking recom­

ment securities” and that a “ short-term money market . . .

mendations for dealing with the persistent inflationary

be established” . Finally, noting that successful monetary

pressures that have cut in half the purchasing power of

policy depends on the skill and judgment of the authorities,

N ew Zealan d’s currency during the past twenty years.

the commission emphasized that recurring disturbances

M ore generally, the commission has highlighted the extra­

from both internal and external factors make flexibility

ordinary insensitivity of N ew Zealand commercial bank

essential and that “ a change of monetary policy is not a

lending to wide variations in bank liquidity, and has raised

sign of weakness, but a sign of increased knowledge and

some important questions about the extent to which mone­

alert appreciation of changing conditions” .

tary control can be exercised through traditional instru­

In other fields also, the commission made a number

ments in economies like N e w Zealand’s. The R o yal C om ­

of recommendations, including the proposals that local-

mission’s report m ay thus mark the beginning of a fresh

authority borrowing rates be kept in line with those at

approach to N ew Zealand’s monetary problems, and m ay

which the central government borrows in the capital m ar­

also offer constructive guidance to other primary-producing

ket, that the Capital Issues Committee should not refuse

countries faced with the need for reconciling rapid eco­

permission to companies to enter the market merely on

nomic growth with reasonable financial stability.




MONTHLY REVIEW, OCTOBER 1956

152

SELECTED ECONOMIC INDICATORS
United States and Second Federal Reserve District
Percentage change
1956
Item

1955

Unit
August

July

June

August

Latest month Latest month
from year
from previous
month
earlier

U N IT E D ST A T E S

Production and trade
Industrial production*.............................................................................
Ton-miles of railway freight*................................................................
Manufacturers’ sales*...............................................................................
Manufacturers’ inventories*..................................................................
Manufacturers’ new orders, total*......................................................
Manufacturers’ new orders, durable goods*...................................
Retail sales*.................................................................................................
Nonresidential construction contracts*............................................

1947-49 =
1947-49 =
1947 -49 =
billions of
billions of
billions of
billions of
billions of
1947 -49 =
1947 -49 =

100
100
100
$
$
$
$
$
100
100

1947-49 =
1947 -49 =
1947 -49 =
billions of
1947-49 =
thousands
thousands
hours
thousands

100
100
100
$
100

141p
220
—
2 7 . 5p
49. 4p
2 8 .9p
15 .1 p

2Q5p
253 p

136
219
97p
2 6 .2
4 9 .2
2 7 .0
13 .5
16. Op
265
249

141
221
106
2 7 .7
4 9 .1
2 7 .9
1 4 .2
1 6 .0
269
248

140
208
102
2 7 .2
4 4 .3
2 8 .7
1 5 .1
1 5 .7
278
246

8 8 .6
114.0
117.0
3 2 4 .5p
149 p
5 1 ,022p
16,467p
4 0 .0
2 ,8 3 3

8 8 .3
1 14.2
116.2
32 4 .9
149
51,600
16,877
4 0 .2
2 ,9 2 7

8 9 .5
110.9
1 1 4 .5
3 0 8 .7
142
5 0,3 1 5
16,677
4 0 .6
2 ,2 3 7

7 2 , 150p
8 7 , 250v
105,340p
3 0,782
7 8 ,3 2 3
141.9
2 9,103

72,750®
87,720p
105,080p
3 0 ,7 2 0
76 ,4 8 8
135.0
2 8,890

7 9 ,3 4 0
7 7 ,3 4 0
103,880
30 ,3 8 0
74,741r
1 32.5
2 6 ,1 5 5

3,7 0 1
5 ,6 0 3
3 ,8 2 2

12,192
6 ,8 9 8
3 ,5 0 5

6 ,3 3 3
7 ,2 5 6
3 ,7 7 7

Prices, wages, and employment
Basic commodity pricesf........................................................................
Consumer pricesf.......................................................................................
Personal income (annual rate) *^[........................................................
Composite index of wages and salaries*...........................................
Nonagricultural employment*..............................................................
Manufacturing employment*............................. ..................................
Average hours worked per week, manufacturingf.......................
Unemployment............................................................................................

9 0 .6
1 1 4 .6p
1 16.8
—
—
5 1 ,621p
1 6 ,840p
40. 3p
2 ,1 9 5

+

4
#
9
5
#
+ 7
+12
#
#
+ 2

+ 1
+ 6
- 9
+ 1
+12
+ 1
#
+ 3
— o
+ 3

+
+

+
+
+
+
+
+
+
_

+

+
+
+
-2

2
1
#
#
#
1
2
1
3

1
3
2
5
5
3
1
1
O

Banking and finance
Total investments of all commercial banks.....................................
Total loans of all commercial banks...................................................
Total demand deposits adjusted..........................................................
Currency outside the Treasury and Federal Reserve B a n k s*..
Bank debits (337 centers)*....................................................................
Velocity of demand deposits (337 centers)*...................................
Consumer instalment credit outstanding!............. .........................

millions of $
millions of $
millions of $
millions of $
millions of $
1 9 47 -49 = 100
millions of $

73,240p
87,570p
1 0 4 ,550p
3 0 ,742p
80,756
1 4 1 .3p
—

United States Government finance (other than borrowing)
Cash outgo....................................................................................................
National defense expenditures..............................................................

millions of $
millions of $
millions of $

6,5 7 9
6 ,8 5 5
3 ,5 4 5

+
+
+

2
#
1
3
#
1

- S
+ 13
+ 1
+ 1
+ 8
+ 7
+14

+78
+22
- 7

+
-

4
6
6

+ 3
-1 4
- 2
#
#
+ 1
+14
#
+ 9
+ 1
#

—
—
+
+

2 x<
3
2
2
1

S E C O N D F E D E R A L R E S E R V E D IS T R IC T
Electric power output (New York and New Jersey)*.....................
Residential construction contracts*........................................................
Nonresidential construction contracts*.................................................
Consumer prices (New York C it y ) f .......................................................
Nonagricultural employment*...................................................................
Manufacturing employment*....................................................................
Bank debits (New York C ity )* ................................................................
Bank debits (Second District excluding New York C it y )* ..........
Velocity of demand deposits (New York C it y )* ...............................
Department store sales*...............................................................................
Department store stocks*............................................................................

1947 -49 = 100
1947 -49 = 100
1947-49 = 100
1947 -49 = 100
thousands
thousands
millions of $
millions of $
1 947 -49 = 100
1947-49 = 100
1947 -49 = 100

Note: Latest data available as of noon, October 1, 1956.
p Preliminary.
r Revised.
* Adjusted for seasonal variation.
Source: A description of these series and their sources is available from




155
—
—
114.4
7 ,7 2 7 .3 p
2 ,6 7 4 .2 p
77,3 3 2
5,1 3 5
1 95.8
117
127

150
205p
279p
114.6
7 ,6 9 2 .6
2 ,6 4 8 .5
6 7 ,9 1 0
5,1 5 7
1 79.8
116
127

158
237
285
113.8
7 ,7 5 2 .2
2 ,7 0 5 .6
6 5 ,4 9 4
4 ,9 0 1
1 66.0
115
126

158
201
254
111.9
7 , 6 2 7 .5r
2 ,6 6 9 .3 r
67 ,7 9 3
4 ,7 9 7
168.7
106
117

f Seasonal variations believed to be minor; no adjustment made,
# Change of less than 0.5 per cent.

% Revised series. Back data available from U. S. Department of Commerce.
the Domestic Research Division, Federal Reserve Bank of New York, on request.

$
+14
+ 7
+ 16
+10
+ 9