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{The article on the last page describes the operations of Federal Reserve Banks as Banking Agents for the Government) M ONTHLY O f C r e d it a n d I n B y pll 1 .III th e ..... F e d e r a l t h e S e c o n d R e s e r v e .......... ......... I.I1I I.M . R E V IE W B u s in e s s F e d e r a l A g e n t , R e s e r v e F e d e r a l Mllll... .1— 1■■■■ ■■!■—HIM .1! .1 C o n d itio n s D is t r ic t R e s e r v e B a n k , III II.. Ill...................... .....— I■■I. — II.T - I Ml II I I N e w ....... ■ Y o r k ■.1■ ■ ■I ■■ ■■—11.^ New York, September 1, 1922 C r e d it C o n d itio n s T HE coal and railroad strikes have ap paren tly been without effect upon the credit situation, which seems to have been influenced b y more fundam ental conditions. F o r m an y months past increas ing commodity prices and a general increase in trade a n d industrial a ctiv ity have facilitated the liquidation of m an y commercial bank loans of long standing. commercial loans and investments, above referred to, fo r reporting member banks in N ew Y o rk C ity and in the U nited States. A cco m pan yin g the pause in the decline in the com m ercial loans of the banks there has recently been a slight increase in the note circulation o f the Fed eral Reserve banks, as shown in the diagram below. In At the same time the investments of the banks in Govern m ent and other bonds have steadily increased. These tendencies were disQussed at some length in the last number of the R eview . D u rin g the past month, however, the dow nw ard move m ent in the volume o f commercial loans has ceased; but the volume of bond investments in banks outside of N e w Y o rk C ity has continued to increase, presum ably as a cum ulative effect o f the liquidation of the past y e a r an d o f the continuing im ports of gold. The volume of bills discounted b y the F e d e ra l Reserve banks is at alm ost the lowest point of the year. Th e follow ing diagram illustrates the tendencies in Federal Reserve Notes in Circulation almost every y e a r since the F e d e ra l Reserve system began there w as a more or less m arked increase in circu lation in the late summer and autum n when funds were needed fo r m oving the crops. B efo re the establishment of the F e d e ral R eserve system this demand fo r funds was often the cause of strained credit or cu rren cy con ditions and an increase in interest rates in this season o f the year. Sin ce the establishment of the Reserve system, however, the pow er of the R eserve banks to su p p ly additional funds when required has eliminated the autum n cu rren cy scarcity and g reatly lessened the 'Changes in Commercial Loans and Total Investments of Reporting Member Banks m the United States and in New York City autum n credit strain. D u rin g 1 9 2 1 the decline in prices and the liquidation o f loans offset the seasonal require 2 MONTHLY REVIEW ments fo r currency and there w as no increase in the autumn. Thus fa r in 19 2 2 note issues have been in much closer correspondence w ith the experience of the years p rio r to 1 9 2 1 . The volume of funds made available fo r investment purposes in the past few months has doubtless been a facto r in the continued rise of prices in the security m arkets at a time when the coal and railroad strikes m ight have been expected to be influences in the other direction. C o m m e r c ia l P a p e r A fu rth er result has been the grad ual low er ing of interest rates. D u rin g the past month, however, the only indications of lower rates were a slight reduc tion in the yield of certain groups of bonds and a slight lowering of rates charged b y banks on their customers ’ commercial paper. The open m arket rate fo r commer cial p aper has rem ained at 4 per cent, and the rate on bankers acceptances at 3 p er cent. S a v in g s m arket fo r their own account, but there w as a f a ir demand from banks in the interior, and total sales b y dealers were about the same as in the month previous. O f the m onth's offerings of new bills, those d raw n to finance the im portation of raw su gar and the exporta tion o f cotton were the most numerous. D e a le rs7 purchases were m ainly to meet day-to-day requirem ents and the total amount of bills in their portfolios remained p ra ctica lly unchanged. B ank D e p o s its R ep ortin g savings banks in the Second F ed eral R eserve D istrict showed a slight decline in aggregate deposits between J u l y 10 and A u g u s t 10 . Su ch a de cline u su ally occurs follow ing the crediting of interest at the m id-year. The trend of deposits in recent months is shown in the accom panying diagram . PER CENT. The p revailin g rate fo r prim e commercial paper re mained unchanged d u rin g A u g u st at 4 p er cent. The market, however, w as sligh tly firmer, p a rtic u la rly in N ew Y o rk C ity , in that the proportion of sales at 4 *4 per cent, increased somewhat and 3 % per cent, paper w as scarcely in evidence. The m arket among the larger banks of N ew Y o rk C ity was dull, and confined to only a few institutions, due a p pare n tly in p a rt to seasonal causes, p a rtly to a some what less satisfacto ry su p p ly of paper, and p a rtly to the continued competition of other form s of investment, p a rticu la rly ta x exem pt securities. The demand from cou ntry banks and institutions in a num ber of the larger interior cities continued in good volume, and dealers reported substantial b u yin g in and about Richm ond, S t. Louis, and Chicago, and on the P acific coast. B an ks are b u yin g fre e ly of the longer m aturities at current rates, which in the opinion of dealers seems to indicate a belief in the continuance of low money rates. The follow ing diagram carries fo rw a rd through J u l y this b an k 's tabulation of the reported outstanding p aper of 2 7 leading commercial p aper dealers. A fu rth er increase in outstanding paper is shown. MILLIONS CF DOLLARS Deposits of 15 Savings Banks in New York City and 15 Savings Banks in the Second District Outside New York City. (Average Deposits in 1918=100 per cent.) B ill M a r k e t Offering rates fo r bankers acceptances were m ain tained du ring A u g u st at the 3 per cent, level which has ruled since Ju n e , although some dealers raised bid rates tem porarily on several occasions from 3 % per cent, to 3 3 4 per cent, because o f firm er m oney con ditions. N ew Y o rk C ity banks were p ra ctica lly out of the Commercial Paper Outstanding— Twenty-Seven Dealers S to ck M ark et M oney R a te s D u rin g A u g u st, call loan rates fluctuated between 3 and 5 p er cent., a sligh tly narrow er range than in J u l y and Ju n e , when 2% and 5y 2 p er cent, were touched occasionally. The usual period o f relative firm ness around the first of the month was prolonged some F E D E R A L R E SER VE AGENT A T NEW YORK what, accompanying loss by this district in the inter-district financial settlements, but in the third week money again was offered plentifully around 3 per cent., or slightly higher. Demand from the stock market appeared to be largely for replacement purposes. Fluctuations in call money during the first part of the month were accompanied by slower trading in time money and a rate of about % of one per cent, higher for most maturities. At the end of the second week rates again declined to those previously prevail ing, which were 3% to 4 y2 per cent, for maturities from 60 days to six months. Some loans were made for maturities before the first of September at 3y2 per cent. S to ck The following diagram shows average monthly bond prices for a period of ten years, as computed by the Annalist. M arket Stock trading was in small volume in late July and most of August, but prices continued upward to new high levels for the year despite domestic labor troubles and uncertain foreign political conditions. The advance in railroad stocks was larger than in industrials, and in both groups became more marked during the third week following a partial settlement of the coal strike. The month marks the completion of precisely one year of almost continuously rising prices, during which the advance in railroad stocks has averaged about eighteen points and in industrial stocks about thirty-six points. At present levels, industrials show a recovery of ap proximately half the decline that took place between November 1919, and August 1921, while railroad stocks have approached or exceeded the highest 1919 prices. Total stock transactions during July were 15,000,000 shares, or about 600,000 shares daily. Trading con tinued at approximately this rate during early August, but about August 21, increased somewhat in response to encouraging reports concerning the railroad and coal strikes. Bond 3 Prices of corporation bonds continued upward during the first three weeks of August to levels about one point above the previous high point touched in July and the highest since 1918. High-grade railroad bonds, which led the advance during the preceding month, were hesi tant, and gains in combined price averages were due to an evening up of prices in other groups. Demand broadened to include even semi-speculative issues, some of which reached new high prices. Prime municipal bonds were slightly firmer in company with corporation bonds. The changes in several different bond groups, as shown by Wall Street Journal averages, were as follows: Foreign issues continued heavy, due to uncertain ties abroad and the heavy volume of new offerings in recent months. Several issues broke sharply when sup port was removed through the dissolution of distributing syndicates. July transactions in bonds other than United States Government securities on the New York Stock Exchange totaled $192,000,000, somewhat under the June total and 33 per cent, less than the high level of $287,000,000 established in April. Compared with transac tions in July last year, however, there was an increase of 81 per cent. U n i t e d S t a t e s G o v e r n m e n t S e c u r i t ie s M arket 10 Highest grade rails....................... 10 Second grade rails........................ 10 Public utilities................................ 10 Industrials....................................... Combined average......................... 1912, 1913 1914 1915 1916 -1917 1918 1919 1920 1921 1911 Average Monthly Price of 40 Bonds Price July 20 Price Aug. 21 Change 91.24 87.06 88.12 95.40 90.45 91.24 89.22 89.05 96.66 91.54 0 + 2 .1 6 + 0 .9 3 + 1 .2 6 + 1 .0 9 In the latter part of July continued demand for Lib erty bonds carried all active issues to new high prices for the year at or above 101. Thereafter, prices reacted and by August 22, active issues declined from one-half to three-fourths of a point from July high levels. Factors of some influence in this decline appeared to be the renewed discussion of a soldiers’ bonus, as well as a tendency for funds to flow into higher yielding issues. The volume of trading reflected mid-summer dulness, and July transactions on the New York Stock Exchange totaled only $111,000,000, the smallest amount since August 1921. Offering rates for Treasury certificates and notes averaged slightly lower during the first three weeks of August. The call of approximately half the outstanding Victory 4% per cent, notes for redemption December 15, this year, resulted in an active demand and higher prices for uncalled notes. The new issue of 4% per cent, four-year Treasury notes, offered concurrently with the call for Victory notes, was more than four times oversubscribed. Of total allotments of $345,000,000, allotments to this dis trict were $117,000,000. The issue is now quoted in the 4 MONTHLY R E V IE W open m arket to yield 4 .14 . In addition to cash sales, $14 2,0 0 0 ,0 0 0 new notes w ere issued in exchange for .Victories, of which $80,000,000 w ere issued in the Se c ond D istrict. N ew A u g u st new financing reflected the usual seasonal slackening, and w eekly totals of new issues decreased to the smallest fo r the year. O f securities offered, refu n d in g of issues previously placed at higher rates con tinued in evidence, but there has been also an increas in g amount o f borrow ing fo r financing business expansion. A notew orthy development of the m onth's corpora tion financing w as the sale of stock issues b y large retail and mail order m erchandising establishments, in some cases at least fo r financing expansion. The prom pt subscription afforded these issues gave testim ony of the change that has occurred both in m erchandising and investment m arket conditions du ring the past year. O ffering of domestic State, county, and m unicipal securities w as slow in A u g u st, but a substantial vol ume of issues is reported in prospect fo r early fall. There was p ra ctica lly an entire absence of new foreign issues in this m arket up to A u g u st 24. F o r e ig n E x c h a n g e The foreign exchange m arket reflected the usual m id summer in a ctivity d u rin g A u g u st. Trad in g, which was confined largely to ord in ary commercial transactions, w as featured b y firmness in the sterling rate in the face of considerable weakness in the p rin cipal conti nental exchanges. M arks continued the sharp decline of recent months, reaching a value of 1 / 2 0 of a cent on A u g u st 24, at a depreciation from gold p a rity of 99.8 p er cent. C an ad ian exchange reached p a r on A u g u st 1 5 , selling at this point for the first time since 1 9 1 5 . F a r E a ste rn and South A m erican exchanges in general held firm du ring the month. The follow ing table shows the changes of the month in the p rin cipal exchanges. Country Aug. 19 Last Change from July 20 England............................. France............................... Italy................................... Germany........................... Belgium............................. Holland............................. Switzerland....................... Spain................................. Sweden (Stockholm). . . . Argentina......................... Brazil................................. Japan (Yokohama)........ China (Hong Kong). . . . China (Shanghai)............ India.................................. Canada.............................. Bar Silver in New York. $4.4775 .0796 .0453 .0008 .0756 .3890 .1907 .1562 .2647 .3619 .1326 .4780 .5813 .7763 .2925 .9988 .6950 + .0256 - .0 0 4 3 - .0 0 0 6 - .0 0 1 2 -.0 0 3 8 + .0008 -.0 0 1 1 + .0007 + .0052 + .0024 -.0 0 2 2 + .0002 0 + .0025 + .0019 + .0085 -.0 0 5 0 \ \ ENGLAND *~\ \ \ - Z 5 %&---- A-------........ F in a n c in g ' Silver Exchange Basis. .'-'A?, Per Cent. Depreciation from Par 8.0 58.8 76.5 99.7 60.8 3.2 1.2 19.1 1.2 14.7 59.1 4.1 * * 39.9 0.1 -50%t . ^ *. \ v i ' \ \ FRA N C E • \ \ \ \ /•-..J \ -75%& — ■ *"\ / V v -5 8 ....... ITALY \ 76 -/ \ \\ \ •- GERMANY » -100% 1919 19 2 .0 19 2 .1 19 2 ,2 . Depreciation of Foreign Exchange Rates from Par Value F o r e ig n T r a d e E x p o rts from the U nited States d u rin g J u l y w ere $30,000,000 less than in Ju n e and im ports were $9,000,000 less. The surplus of outgoing m erchandise declined to $54,000,000, the smallest export surplus fo r an y month since F e b ru a ry . The follow ng table compares totals of exports and imports, and surplus of exports, fo r the first seven months of this y ear w ith corresponding totals fo r p re vious years. Since 1 9 1 9 there has been a steady tendency tow ard the reestablishment of a closer cor respondence between exports and imports. (000,000 Omitted) Year Exports Imports Excess Exports 1914 1915 1916 1917 1918 1919 1920 1921 1922 $1,200 1,970 2,925 3,661 3,483 4,626 4,897 2,860 2,126 $1,141 1,009 1,468 1,779 1,787 1,954 3,482 1,499 1,670 $ 60 962 1,458 1,882 1,695 2,671 1,416 1,361 455 The decrease in the J u l y export total m ay be ac counted fo r in p a rt b y a decrease in cotton shipments from 4 9 1,0 79 bales to 3 7 3 ,7 4 2 bales. Th is total w as the smallest since F e b ru a ry and 29 p er cent, less than shipments in J u l y last year. F o r the crop y e a r ju st completed, however, exports w ere considerably larger than for the preceding crop y e a r both in amount and in relation to the total crop. F ig u re s fo r the past eleven years are shown in the follow ing table. FE D E R A L R E SE R V E AG EN T A T N E W YO R K (Millions of Dollars) E P r o d u c t io n Year Ending July 31 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 (Including Linters) No. of Bales 16,250,000 14,313,000 14,795,000 16,992,000 12,123,000 12,781,000 12,428,000 12,970,000 12,029,000 13,880,000 8,352,000 11,449,000# xports (Including Linters) No. of Bales 10,719,000 8,746,000 9,151,000 8,545,000 6,191,000 5,739,000 4,476,000 5,664,000 6,598,000 5,725,000 6,404,000 Production figures cover crop grown during preceding calendar year. x — Estimated, exclusive of linters. A fu rth er possible facto r in lower J u l y export totals w as a continued ligh t dem and fo r iron and steel and copper. Ju n e iron and steel shipments were 8 p er cent, less than those of M ay, though th ey w ere otherwise the largest since early last year. Copper demand is rela Foreign Net Financing Imports in of Gold United and Silver States 1921 Total of Foreign Financing and Net Imports of Gold and Silver United States Export Balance (Merchan dise) April.................... M ay..................... June..................... July..................... August................ September.......... October............... November.......... December........... 62 47 30 6 139* 8 42 51 121 53 63 741 29 41 88 81 62 45 60 88 63 42 52 28 91 88 117 87 200 53 102 139 185 95 115 102 445 272 135 86 125 151 147 172 146 155 83 59 1922 January............... February............. March................. April.................... May..................... June..................... July..................... 93 58 163 207 39 119 55 28 25 35 10 5 12 43 121 82 198 217 44 131 98 62 35 74 101 55 74 54 January............... February............. tively dull from all countries, including Germ any, which w as the largest bu yer o f A m erican production du rin g the past year. Contrasting with quietness in these lines there developed around the first o f A u g u st h eavy export business in wheat and a steady demand fo r corn and rye. The up w ard trend of the past seven months in cotton cloth exports continued through Ju n e , and, while a period of quietness accom panied un certainty over cotton prices ea rly in A u g u st, the renewed strength in cotton prices in the th ird week of the month again brought additional inquiries fo r goods. F a cto rs in the low er im port total fo r J u l y were decreases in im ports of silk and sugar. Coffee imports, on the other hand, increased, and rubber im ports rose n early 10,000 long tons to 2 5 ,2 4 5 tons, the largest total since F e b ru a ry . C u r r e n t B a la n c e of T rade The accom panying table, brin gin g up through J u l y a tabulation printed in the R ev iew of M a y 1 , shows that * Refunding May $50,000,000. f Hawaiian Issue sold during year, included. G o ld M ovem ent Gold im ports d u rin g J u l y amounted to about $43,000,000, the largest receipts since Novem ber 1 9 2 1 . The large total w as due entirely to B ritish shipments of $38,000,000. (000 omitted) (Monthly Average) 1921 Jan .-Mar. Apr.-June 1922 1922 July 1922 Total 1922 $16,841 5,530 3,071 $6,266 9,345 1,765 $1,954 1,174 816 $38,000 245 580 $62,663 31,804 8,321 C h in a and Hong Kong France.......... Denmark.. .. Norway........ All Other. . . . 1,964 15,891 453 128 13,728 170 3,317 3,437 1,601 3,686 1,040 791 2,115 1,026 2,486 342 1,688 2,131 3,972 14,011 16,655 7,880 20,647 Total......... $57,606 $29,587 $11,402 $42,986 $165,953 Sweden......... in recent months credits created in this country through sales of foreign securities and net im ports of gold and silver have continued to offset this c o u n try ’s m onthly W o r ld ’s S e a -G o in g export balance in merchandise. The amounts of sea-going steel and iron steam vessels owned b y prin cip al countries in Ju n e 1 9 2 2 have recently been announced b y L lo y d ’s R egister of Sh ipping. F i g ures are shown in the follow ing table in thousands of gross tons, together w ith the change since 1 9 2 1 and since 1 9 1 4 in the amounts owned b y different countries. The total increase in the y ea r amounts to about 2,600,000 gross tons. The country showing the largest increase is The figures fo r J u l y , however, indicate an im portant alteration in the pro portion of credits established here b y these two means. A m arked reduction in the volume of foreign issues sold here w as accompanied b y a rise in im ports of gold and silver to the highest levels since the close of last year. S h ip p i n g MONTHLY R E V IE W Germ any, which increased her m erchant m arine b y more than one m illion tons, la rg e ly through purchases from G reat B rita in and other countries. H olland shows the second largest increase, w ith 400,000 tons. I n spite o f h eavy shipbuilding operations the U nited K ingdom shows a sm all net loss fo r the y e a r due to the sale of ships. o f G erm any, where a continued h eavy volume of new cu rren cy issues w as accom panied b y an increase o f more than 50 p er cent, in wholesale commodity prices. I n the first three weeks of A u g u st prices of basic com modities in E n g la n d reacted dow nw ard follow ing a sim ilar movement which began a few weeks earlier in the U nited States. (In thousands of gross tons) D o m e s t i c P r ic e s Country June 1914 United Kingdom. . . . 18,877 British Dominions... 1,407 United States............. 1,837 Austria-Hungary. . . . 1,052 Denmark..................... 768 France......................... 1,918 Germany..................... 5,098 Greece......................... 820 Holland....................... 1,471 Italy............................. 1,428 Japan........................... 1,642 Norway....................... 1,923 Spain........................... 883 Sweden........................ 992 Other countries......... 2,398 World’s total......... 42,514 W o r ld Differ Differ ence ence between between 1921 and 1914 and 1922 1922 June 1921 June 1922 19,288 1,950 12,314 19,053 2,201 12,506 + + 235 251 192 + 176 + 794 +10,669 866 3,046 654 576 2,207 2,378 3,063 2,285 1,094 1,037 3,459 54,217 944 3,303 1,783 653 2,613 2,600 3,325 2,337 1,187 996 3,301 56,802 + 78 -I- 257 +1,129 + 77 + 406 + 222 + 262 + 52 + 93 41 158 +2,585 + 176 + 1,385 - 3,315 167 + 1,142 + 1,172 + 1,683 + 414 + 304 4 + + 903 +14,288 P r ic e s Th e movement o f w orld commodity prices a t wholesale w as in general sligh tly n p w a rd d u rin g J u l y , although this movement was not pronounced except in the case A large increase in the p rice o f fu el resulting from the coal strike, together w ith some increase in prices o f farm products ea rly in the month, brought the D epartm ent of L a b o r index of wholesale prices fo r J u l y to 1 5 5 , a figure more than 3 p er cent, higher than the Ju n e level. T h e changes in the index b y com m odity groups are shown in the follow ing table. (1913 average = 100 per cent.) Value of Index Commodity Group Farm products...................................... Foods...................................................... Cloths and clothing............................. Fuel and lighting.................................. Metals.................................................... Building materials............................... Chemicals and drugs........................... House furnishing goods...................... Miscellaneous........................................ All groups...................................... Per Cent. Change June 1922 July 1922 June to July 131 140 179 225 120 167 122 176 114 150 135 142 180 254 121 170 121 173 114 155 + 3 .1 + 1.4 + 0 .6 + 1 2 .9 + 0 .8 + 1.8 - 0 .8 - 1.7 0.0 + 3 .3 (1913 average=100 per cent, unless otherwise noted) Country Latest Quotation United States: 20 basic commodities*. Dept, of Labor.............. Dun’s ............................... Bradstreet’s .................. Great Britain: Econom ist...................... Statist..................... 20 basic commoditiesi. France................................. Ita ly ..................................... Japan................................... Canada............................... Australia*........................... Norway3............................. Germany*......................... Denmark*.......................... 138 (Aug. 19) 155 (July 15) 144 (Aug. 1) 131 (Aug. 1) 163 (Aug. 1) 157 (Aug. 1) 138 (Aug. 19) 325 (Aug. 1) 537 (July 1) 201 (July av.) 166 (July 15) 156 (June 15) 232 (Aug. 1) 13935 (Aug. 1) 180 (Aug. 1) P er C ent . C hange D uring M ay June + + + + + + + + + + + + + 1 .8 + 1.4 + 2 .2 + 1.7 + 0 .4 + 0.1 + 1.4 + 2 .6 + 2 .6 + 1.5 - 0 .8 + 0 .6 - 0 .4 + 1 6 .6r + 0 .6 5 .4 3 .5 1.1 1.7 1.9 0 .5 3 .3 1 .0 0 .6 1.6 0 .5 4 .7 2 .1 6 .3 i 1.1 July + + + + 0 .1 3 .3 0 .1 0 .3 0 .1 1.7 2 .8 0 .0 + 1.9 + 0 .5 + 0 .9 + 5 2 .5 0 .0 iComputed by this bank. *July 1914 = 100. sDecember 3 1 , 1913June 30, 1914*100. ‘Middle of 1914*100. ‘July 1912-June 1914® 100. r=Revised. To w ard the latter p a rt of J u l y and e a rly in A u g u st, the price of w heat broke sh a rp ly and there w ere losses in a num ber of other basic commodities; so that this b a n k ’s index o f 20 basic commodities w as 3.8 p er cent, lower on A u g u st 2 1 than on J u l y 10 . The recent dow nw ard movement corresponds closely w ith a sim ilar movement w hich took place in the sp rin g of the year. The follow ing diagram makes a com parison between the course of the D epartm ent o f L a b o r index and the index o f 20 basic commodities m aintained b y this bank. The D epartm ent o f L a b o r index is computed each month and is an average of prices fo r the entire month, while the index of 20 basic commodities is computed on M onday of each week and both b y reason of the commodities included and the method of compu tation, reacts more ra p id ly to changed p rice conditions than does the D epartm ent of L a b o r index. The Cost of L iv in g index num ber m aintained b y the N ational In d u strial Conference B o ard shows substan tia lly no change fo r J u l y . Th e index now stands at 15 5 .6 ( J u l y 1 9 1 4 , equals 10 0 per cent.). F E D E R A L R E SE R V E AGENT A T NEW YORK PER CENT. a demand for the highest grade o f stenographers at $25 a week, while applicants fo r that type o f position ask $ 30 and $35 a week. I n a num ber of occupations the average wage pay ment has been reduced gradually through lowering the hiring rate fo r new employees and without any salary cuts. E m p lo y m e n t Wholesale Prices in the United States According to Two Indices (1913 Average=100 per cent.) W ages The U nited States Steel Corporation announced on A u gu st 22 an increase of 20 per cent., from 30 to 36 cents an hour, in the wages o f common or unskilled laborers, to become effective on September 1, and a cor responding adjustm ent in wages o f other workers. A m ajority o f the independent steel companies granted sim ilar increases in wage rates at about the same time. The new rate is 80 per cent, above that o f 1915 and undoubtedly reflects the greater competition fo r un skilled labor, which has been evident in the steel and other industries during the summer months. This ten dency was indicated last m onth by an increase in the index o f common labor wage rates computed b y this bank, and reported in the A u gu st 1 Review. A n increase averaging 47 per cent, and affecting be tween 30,000 and 40,000 non-union coal miners in The New Y o rk State Departm ent o f Labor reported fo r J u ly a decline o f 60 per cent, in the number em ployed in railroad repair shops in New Y o rk State on account o f the strike. The effect o f this decline upon the total number o f persons em ployed in industries of the State was offset by increased em ploym ent in the miscellaneous metal and machinery industries, in iron and steel mills, automobile plants, clothing factories, and in the m anufacture o f building materials and food products. The follow ing diagram shows the increase in recent months in the num ber o f factory workers both in N ew Y o rk C ity and throughout the State as reported by the New Y o rk State D epartm ent o f Labor. The New Y o rk C ity index is much influenced by conditions in the apparel trades. That industry did not share largely in the general industrial expansion o f 1918 and 1920, and in 1921 and 1922, has been ham pered by labor disputes. In neither the city nor the State is the em ploym ent index yet back to the 1914 level. E m ploym ent agencies in the State report a steadily increasing dem and fo r workers o f all types w ith a cor responding decline in the number o f applicants fo r positions. The number o f applicants, however, continues to exceed the num ber o f positions except in the cases o f common labor, the building trades, and a few spe cialized occupations. pec cent Pennsylvania was announced A u g u st 22 by several coal companies owned by steel companies which use the en tire production of these mines. The tendency to increase wages has not been u niform among all types o f workers. The continuation o f a gradual downward wage readjustm ent particularly among clerical workers is reported by a number o f em ploym ent agencies in the district. E m ployers frequently are attem pting to replace at somewhat lower salaries employees who resign. This is especially true among clerical workers. The result is a greater difference than usual between the salaries offered b y employers and those which the applicants expect. There is, fo r example, Number of Workers Employed in Industrial Establishments in New York State and New York City. (Figures for July, 1914= 100 per cent.) M ONTHLY R E V IE W 8 Production in Basic Industries Volume of Building L a r g e ly b y reason of a shortage in the car supply, in which the railro ad strike w as a factor, the production of bitum inous coal in J u l y was about 2 5 per cent, less than in Ju n e . The weekly figures fo r J u l y and the e arly weeks of A u g u st showed a gradual increase. The sus pension o f anthracite m ining w as p ra ctica lly complete in the period fo r which reports are available. The m an ufactu re of coke has gone fo rw a rd w ith little interruption. Other indices of production fo r J u l y show in general, some interruption of the u p w a rd movement which had been p ra ctica lly continuous fo r about a year. Steel output w as sligh tly sm aller in the face of some dim inu tion in the demand, p a rticu la rly the export demand, and current reports fo r A u g u st indicated a still fu rth er reduction o f output in that month. To tal p ig iron pro duction in J u l y was la rg e r than in Ju n e , but the furnaces in blast diminished du ring the month from 1 9 2 to 1 7 1 , and production in A u g u st w as at a low er rate. A continued increase in cement production together w ith a decrease in the output of lum ber m ay be p a rtly explained b y a recent decrease in contracts let fo r resi dential construction and an increase in contracts let fo r public works and industrial construction. Representatives of the textile in d u stry report that the decreased consumption of cotton in J u l y w as due m ainly to a lighter demand rather than to the coal strike, except to the extent that the strike exercised an influence on the general business outlook. The follow ing table shows fo r successive months the production of a number of basic commodities expressed as percentages of estimated normal production. In the calculation o f normal, allowance has been made fo r both y e a r to ye a r grow th and seasonal variation. B u ild in g contract aw ards reported b y the F . W . Dodge C om pany for the tw enty-seven northeastern States in J u l y were about 2 per cent, larger than in Ju n e , but were still sligh tly under the exceptionally large totals of A p r il and M ay . Residential construc tion w as considerably under the Ju n e figure, but this loss w as more than offset b y large expenditures fo r public works and educational buildings. The J u l y in crease w as m ainly in the C entral W estern States, and most eastern States showed slight declines. A w a rd s in N ew Y o rk and N orthern N ew Je r s e y declined about 4 per cent., due to a fu rth er reduction in aw ards in N ew Y o rk C ity . Feb. Anthracite coal mined............. Bituminous coal mined........... Pig iron production................. Steel ingot production............. Copper production, mine. . . . Tin deliveries............................ Crude petroleum production.. Portland cement production.. Wheat flour production.......... Meat slaughtered..................... Sugar meltings.......................... Wool consumption*................. Cotton consumption............... Lumber production................. Wood pulp production............. Tobacco consumption............. Paper (total) production*.. .. Gasoline production................ 99 82 57 58 33 58 111 82 105 98 129 115 92 83 90 77 85 89 Mar. Apr. May June July 105 89 65 71 46 103 111 104 114 112 142 128 91 93 100 83 100 97 p — Preliminary, r— Revised. * Seasonal variation not^allowed for. 0. 3p 34p 67 74 59 100 109 111 95 96 124 95 80 75 92 79 89 95 0.4p 41p 73 81 68 92 111 119 100 108 146 l.Op l A p 43p 32p 82 79 82 79 74 68 90 75 HOp . . • 120 128 104 142 112 135 i3 i ’ 88 96 108 91 100 96 92 82 r 110 ioo 101 *84 76 T r a ffic F re ig h t car loadings on the railroads of the U nited States in recent weeks have been from 8 to 1 0 p er cent, heavier than in the corresponding weeks o f 1 9 2 1 , but have been about the same amount behind 19 2 0 . The increase over last y e a r w as due chiefly to a steady gain in the movement of m erchandise and miscellaneous freight, and w as in spite of low er coal loadings since A p ril. Coal traffic increased sligh tly du rin g the latter p a rt o f J u l y and e a rly in A u g u st but w as still sligh tly un der the weekly totals before the railroad strike. T h e dia gram below on the le ft shows coal loadings b y weeks from Ja n u a r y to A u g u st of 1 9 2 1 and 19 2 2 , while that to the righ t shows fo r each week cum ulative loadings, that is, total loadings since the first o f the year. THOUSANDS OF CARS MILLIONS OF CARS £50 £00 (Normal Production=:100 Per Cent.) Commodity R a ilw a y A i r y rA1 9 2 1 150 N* \ % \ / 192/ 100 y 7 / V■ 50 EKS a JAN FE&MAR.APR. MAYJUNEE> JULYA UG. Coal Loadings Each Week Total Coal Loadings from the First of the Year Through Each Week Loadings of coal were much heavier in the first three months of 19 2 2 than in the same period of 1 9 2 1 , la rg e ly in anticipation of the coal strike, and the total move ment up to A p r il had exceeded loadings in the same period of 1 9 2 1 b y two or three w eeks' operations. U p to the second week of A u g u st loadings w ere about five weeks behind 1 9 2 1 figures. FED E R A L RE SE R V E AGENT A T NEW YORK The movement o f the new crops began in J u l y 19 2 2 , at a somewhat slower rate than last year, but total grain traffic up to the end of the second week in A u g u st has been larger than in 1 9 2 1 because of a heavier movement o f grain ea rly in the year. Th e diagram below to the le ft compares w eekly totals while that to the righ t shows cum ulative loadings since the first of the year. THOUSANDS OF CARS MILLIONS OF CARS N et ra ilw a y operating income (a fte r adjustm ent fo r joint fa c ility and equipment rentals) of the Class 1 roads fo r the first h a lf of 1 9 2 2 w as reported b y the B u reau of R a ilw a y Econom ics at an annual rate of about 4.4 p er cent, on the tentative p ro p erty valuation of these roads as determined b y the Interstate Commerce Commission. In M arch, the last month before the coal strike, earnings reached the 5 % p er cent, rate fixed as a fa ir return b y the Interstate Commerce Commission, but in A p ril, M ay, and Ju n e , they ranged from a rate of about 3 y 2 per cent, to about 4 % per cent. C rop Grain Loadings Each Week R a ilw a y Total Grain Loadings from the First of the Year Through Each Week E a r n in g s N et earnings of 2 0 1 Class 1 railroads in the U nited States were higher fo r the first six months of 1 9 2 2 than fo r the same period of a n y other y e a r since 1 9 1 7 . D e tailed figures on earnings and expenses, indicate that there has been little increase in gross income, and higher net earnings have been due la rg e ly to reduction in w ork in g forces and to sm aller repair, renewal, and m ain tenance outlays. Th e follow ing diagram compares net earnings fo r the first h a lf o f each y e a r since 1 9 1 3 as tabulated b y the Com m ercial and F in a n cia l Chronicle. 553 552 Net Earnings of Class 1 Railroads in the United States in the First 6 Months of Different Years (in Millions of Dollars) 9 C o n d itio n s Su bstan tial im provem ent du rin g J u l y in the condit ic r o f most im portant crops w as reported b y the Departm ent o f A g ricu ltu re . The crop estimate fo r A u g u st 1 , placed the average condition of all crops in the U nited States at 1 per cent, above the ten-year average fo r that date, as com pared with 2 per cent, below the average on J u l y 1 . C rops in N ew Y o rk and N ew Je r s e y w ere in relatively better condition than those of other States except N orth Dakota and M ontana. Probable yields o f corn and wheat in view o f A u g u st 1 crop conditions were estimated fo r 19 2 2 , at p ra c tica lly the same as in 1 9 2 1 . The cotton crop w as esti m ated at 11,4 4 9 ,0 0 0 bales, 40 per cent, more than in 1 9 2 1 . The indicated cotton and corn crops are above the average of the past five years while that of wheat is about equal to the average. W h o le s a le T r a d e The weighted index of wholesale trade in this district, computed b y this bank from reports received from 1 2 2 dealers in ten im portant commodities, shows that the J u l y sales w ere 2 .3 p er cent, greater than the sales of J u l y a y e a r ago. T h is is the largest gain over the same month in the preceding y e a r that has been made since Ju n e 19 20 . The gain reflects greater confidence of retail m erchants in p lacing fa ll orders and the some w hat higher prices w hich some o f the commodities now command. The diagram s at the top of page 10 compare the J u l y sales o f each of these ten commodities fo r the past fou r years. The columns represent only the dollar value of sales and no allowance has been made fo r fluctuations in prices. Sales in J u l y w ere large r than in J u l y a y e a r ago in eight of the ten commodities. Shoes and d r y goods showed losses. O ur index of shoe sales has been g reatly reduced b y the closing of a num ber o f factories in Rochester fo r several months on account of labor trou bles. The erratic fluctuations in the price of ra w cotton have retarded sales o f d r y goods, as buyers are reluc tant to order un til prices become more stable. 10 M ONTHLY R E V IE W DRY GOODS CLOTHING GROCERIES flu rin fin [in 19 *20 'ZO *19 'ZZ *21 ZZ ‘21 *19 ‘2 0 *19 20 ‘21 ‘22 ‘19 ‘2 0 *21 ZZ 19 '19 20 A 4 3 p er cent, increase in sales o f diamonds since a yea r ago w as due to the fa c t that sales in J u l y of last Sales of diamonds are still 19 19 . The increase in machine tool sales reflects greater a ctivity in industrial plants. Th e figures in detail are shown in the follow ing table. D Firms Reporting July 1919 Diamonds........... Machine Tools.. Jewelry................ Hardware............ Drugs................... Clothing (Total). (a) Men’s........ ( b ) Women’s .. Groceries............. Stationery........... Dry Goods.......... Shoes.................... Total (weighted) 7 4 6 11 6 22 (8 ) (14) 42 6 8 10 122 July 1920 July 1921 Per Cent. Change July 1921 July to 1922 July 1922 27 132 93 123 101 93 126 66 112 135 107 65 100 16 27 30 72 98 75 104 51 62 80 67 57 64 22 34 36 82 104 79 111 53 65 81 65 45 66 ollar 100 100 100 100 100 100 100 100 100 100 100 100 100 V alue of ‘22 I I I I Ti■■ I l i i *22 only about one-fifth as large as in J u l y ‘21 JEWELRY 21 22 19 20 *21 ZZ ‘19 Sales of Representative Wholesale Houses in July 1922, Compared with Sales in July of Previous Years. 1919=100 per cent.) No Allowance is Made for Price Changes y e a r were g re atly reduced. ‘20 DIAMONDS STATIONERY MACHINE TOOLS HARDWARE ‘21 DRUGS SHOES Sa l e s + 4 2 .7 + 2 6 .5 + 2 2 .7 + 1 3 .7 + 6.3 + 5.4 + 6.6 + 3.3 + 4.5 + 0 .9 - 2 .7 -2 1 .3 + 2 .3 ‘20 * it ‘2,2, (Sales in July C ity the departm ent stores reported an increase o f 2 .3 p er cent., due m ainly to la rg e r sales of house fu rn ish ings, reflecting the completion of large num bers o f new residential buildings. Sales in B uffalo, N ew ark , and Syracu se were about 4 p er cent, below those o f last J u l y . Sales in B rid gep o rt increased 5 p e r cent, follow ing greater a ctiv ity in m an ufactu rin g plants in th at city. M id-sum m er is norm ally the dullest period of the ye a r in the business o f departm ent stores, as m an y peo ple are a w a y on vacations, and in N e w Y o r k C ity the stores are closed on S a tu rd a y s. J u l y sales w ere about one-third below those of Ju n e , and in norm al years A u g u st sales are sligh tly below those o f J u l y . They increase in Septem ber and the height of the fa ll bu yin g PER CENT. D e p a rtm e n t S to re T ra d e J u l y sales of departm ent stores in this district were about the same as those of last J u l y , according to reports received b y this bank from 50 firms operating 64 stores. The largest decline, which amounted to 6 per cent., w as reported b y those stores that sell ap parel exclu sively and w as due to somewhat low er prices, p articu la r ly in connection w ith special sales. In N ew Y o rk Sales of 64 Department Stores in the Second District Average=100 per cent.) (1919 FED E R A L R E SER VE AGENT A T NEW YORK 11 season occurs in October. The foregoing diagram of the sales b y departm ent stores in this district indicates to low er prices. The num ber o f pairs o f shoes sold b y these stores w as 5 .5 p er cent, greater in J u l y of this how closely the sales o f different years follow the same J u l y sales b y m ail order houses were n early 20 per ye a r than last. The average p rice p er p a ir declined 7 .2 per cent, from $ 3 .6 3 last J u l y , to $ 3 .3 7 in J u l y of this year. cent, greater than those of last y e a r and reflect the D etailed figures are shown in the table that follows. seasonal variations. im provem ent in the financial position o f agricu ltu ral districts where the bulk of m ail order business origi nates. M ail order sales continued to be much below the levels reached in 1 9 1 9 and 19 20 . Detailed figures are shown in the table that follows. Stock on H and Retail Price (in percentages) N et Sales (in percentages) Type of Store July 1919 July 1920 July 1921 % Change in Sales per Store, July July 1921 1922 to July 1922 93 81 89 76 60 85 84 138 104 108 107 95 119 117 100 100 100 100 100 100 100 120 117 101 99 98 98 113 Number of Stores July 1921 July 1922 Grocery.. 6,001 8,006 Ten Cent. 1,602 1,665 255 251 Drug. . . . Cigar. . . . 2,246 2,549 373 Apparel. . 369 186 Shoe........ 210 Total. . 10,659 13,054 T otal N et Sales (in percentages) - 9 .7 + 1 2 .6 + 2.9 -1 2 .7 - 2 .8 - 1 3 .1 - 7.8 July July July July Aug.l Aug.l Aug.l Aug.l 1919 1920 1921 1922 1919 1920 1921 1922 All Dept. Stores.. 95 New York. . .. 99 Buffalo............. 91 Newark........... 92 74 Rochester........ 90 Syracuse.. . . . . 84 Bridgeport.. .. Elsewhere in 2nd District 79 Apparel Stores... 98 Mail Ord. Houses 153 113 115 110 116 106 117 137 100 100 100 100 100 100 100 100 102 96 96 100 95 105 87 86 93 90 87 92 99 125 124 122 133 143 135 119 100 100 100 100 100 100 100 99 101 101 99 93 83 99 109 105 160 100 100 100 102 94 119 78 93 * 104 129 * 100 100 * 89 107 * B u s i n e s s F a il u r e s The ,num ber and aggregate liabilities o f commercial failures in the U nited States reported b y D u n ’s fo r J u l y were p ra ctica lly the same as in Ju n e , though nor m ally the J u l y total shows an increase. F a ilu re s were reported fo r the first three weeks of A u g u st at about the same rate as in J u l y . This b an k ’s index, which is based upon the number of failures each month in proportion to the num ber o f Stocks held b y department stores declined about 6 p e r cent, between J u l y 1 and A u g u st 1, a norm al decline d u rin g the summer months. The value of the stocks firms in business and which makes allowance fo r sea sonal change, was lower fo r J u l y than fo r a n y month since October 1 9 2 1 . The follow ing diagram shows the decline in recent months. held is about the same as one y ea r ago. Some m erchants have placed large orders fo r fa ll goods while others have delayed m aking extensive p u r chases. In general, those stores which are situated a long distance from N ew Y o rk and other m arkets have bought freely to avoid delays which m ight result from ra ilw a y labor troubles. B u t the stores which are sit uated in the v icin ity of p rim a ry markets have delayed placin g the bulk of their fall orders. C h a in S to re S a le s J u l y sales b y the chain store system s that report to this bank were 12 .9 per cent, greater than those o f J u l y last year. W ith the exception of the five and ten cent stores, this increase has been due la rg e ly to the opening o f new stores b y the reporting systems. Sales b y shoe stores show a loss of 2 per cent., due Percentage of Firms Failing to the Number in Business, in Terms of Annual Rate. Seasonal Variation Allowed For Federal Reserve Banks as Banking Agents for the Government H E largest business organization in this country is the U nited States Governm ent. To meet its annual expenditures it collects in revenue, or bor rows through sale of securities, sums v a stly greater than an y ever approached b y a p rivate corporation. U ntil recently, however, there has been no country-w ide or ganization to handle these operations. T T h e I n d e p e n d e n t T r e a su r y Th e first and second U nited States B an ks, which re p resented an attem pt to handle Governm ent funds through one central F e d e ra l bank, succumbed to opposition of the State banks and a belief that th ey were undem ocratic. So insecure, however, were G ov ernment deposits in the then b ad ly m anaged State banks that the Governm ent in 18 4 6 created the S u b trea su ry System , or the so-called Independent T rea s u ry , which w as designed to c a rry on all Governm ent financial operations com pletely independent of the banks o f the country. D u rin g the C ivil W a r, and afterw ard s, the G overn m ent found increasing need fo r closer cooperation w ith the banks fo r distributin g its securities and other p u r poses. M oreover the custom of locking up funds in the T re a su ry vau lts fo r indefinite periods often resulted in a serious shortage o f fund s fo r the conduct o f the coun t r y ’s business. C ertain funds were allowed to accum u late in depository banks but there w as no satisfacto ry system of distributin g the fund s among the banks. B ankers fo r t h e Governm ent One of the objects of the F e d e ral R eserve A c t w as to provide the Governm ent w ith a suitable banking agent. U nder the term s o f the A c t, on Novem ber 2 3 , 1 9 1 5 , the F ed eral R eserve B an ks were officially appointed fiscal agents of the Governm ent b y the Se cre tary of the T re a su ry , and were empowered to accept Governm ent receipts, c a r ry Governm ent deposits, and p a y checks a n d w arran ts draw n b y the Treasu rer of the U nited States, as w ell as coupons on the Governm ent debt. To these typ es of service the Reserve banks are b y the nature of their organization p ecu liarly adapted. A n y Governm ent check, no m atter where draw n, w ill be paid at a n y o f the 1 2 Reserve banks or their 2 3 branches, thus p rovidin g a convenient and prom pt means of paym ent. The breadth of the Reserve bank facilities are sim ilarly convenient fo r the handling of T re a su ry notes and certificates of indebtedness, which m ay be redeemed at a n y Reserve bank regardless of where they were sold. The p rivate telegraph system m aintained b y the Reserve banks b y which funds can be tran sferred instan tly to and from different sections o f the country has also proved absolutely essential to the Governm ent’s immense operations during and since the W o rld W a r. M ee t in g G o v e r n m e n t W ar N eeds The outbreak of the w a r resulted not only in a vast expansion in the operations o f the Reserve banks as bankers to the Government, but in the assumption of responsibilities, unprecedented in both character and volume, in effecting the flotation and distribution of Governm ent w a r securities. A s adm inistrative centers o f the L ib e rty Lo an committees, th ey were the heart of the greatest bond selling organizations ever created. T h e y advertised the bonds, handled the subscriptions and paym ents, distributed the bonds, and kept the ac counts of five bond issues aggregatin g $21,000,000,000 w ith more than 63,000,000 subscriptions. J u s t as cu r ren cy requires changing from one denomination to an other, so these issues o f L ib e rty bonds and V ic to ry notes require changing not only from one denomination to another, but also from one issue to another, from registered to unregistered or vice versa, from tem porary to permanent. These operations were undertaken b y the Reserve banks and are still being carried forw ard. Interest paym ents are made through the Reserve banks and V ic to ry notes as th ey m ature are being redeemed. The Reserve banks have also assumed charge of the sale and redem ption in th eir respective districts of the successive issues of T re a su ry certificates o f indebtedness b y means o f which the Governm ent supplied its current needs in intervals between the flotation o f L ib e rty Loans and now m aintains its floating indebtedness. In all, from the first certificate issue in 1 9 1 7 to the most recent certificate and short note issues in the refun din g pro gram of the T rea su ry, the Reserve banks acted as agents fo r the distribution of $36,000,000,000 short term Gov ernment issues, and fo r the redemption of $32,00 0,000,000. To avoid disturbance to the m oney market, funds obtained b y the Governm ent from sales of all such issues are perm itted to rem ain in the banks as G ov ernment deposits until required, secured b y collateral pledged w ith the R eserve banks. S ize of O p e r a t io n s Some idea o f the size of these operations m ay be gathered from the follow ing figures fo r the y e a r 1 9 2 1 fo r the F e d e ra l Reserve B an k of N ew Y o rk alone: Government cheeks handled......................................... $1,638,000,000 Government funds transferred by telegraph.............$1,220,000,000 Government bonds and notes handled for conver sion or exchange...................................................... $5,639,000,000 Certificates of indebtedness and short term notes sold............................................................................. $1,481,000,000 Number of employees in fiscal agency departments 264 The cost of fiscal agency operations o f the Reserve banks up to J u l y 1 , 1 9 2 1 , w as reim bursed b y the G ov ernment, but since that date, all expenses, except a few incidentals, have been borne b y the Reserve banks. F ro m J u l y 1 to Decem ber 3 1 , 1 9 2 1 , the services p er form ed fo r the Governm ent b y the F e d e ra l Reserve B an k of N ew Y o rk , solely in connection w ith the handling of Governm ent loans cost $ 5 7 2 ,7 4 8 . W ith the continuous enlargem ent of the fiscal agency operations of the R eserve banks, the necessity fo r m ain tainin g the Subtreasuries w as reduced correspondingly. B y A c t of Congress, approved M a y 29, 19 2 0 , their dis continuance w as authorized, and e a rly in the ensuing y e a r the Reserve banks fo rm ally took over all their functions except the keeping of the m etallic reserve be hind gold and silver certificates and U nited States notes, which was transferred to the T re a su ry at W ashington. Th e closing of the Subtreasuries m arks the final pass ing of the Independent T re a su ry and its replacem ent b y the Reserve banks. In place o f an expensive, cum bersome, inelastic system fo r handling public fund s al most entirely unrelated to the business life of the coun try , the Reserve banks provide p ra ctica lly w ithout cost to the Government, a flexible organization im m ediately related to the banking and business life of the entire country.