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MONTHLY REVIEW of Credit and Business Conditions S e c o n d Federal Reserve Agent F e d e r a l R e s e r v e Federal Reserve Bank, New York D is t r ic t September 1, 1928 (The following article is quoted from the forthcoming September Bulletin of the Federal Reserve Board.) P o s i t io n o f R e s e r v e B a n k s Total Reserve Bank credit outstanding in the third week of August averaged $1,470,000,000, showing1 an increase of $370,000,000 over the corresponding period in 1927. This increase in Reserve Bank credit was brought about by a loss of $467,000,000 from the coun try’s stock of monetary gold, offset in part by a de crease of $107,000,000 in the demand for currency. Changes for the year in other factors in the Reserve Bank position have been of relatively minor importance. As a consequence of the loss of gold during the year the ratio of reserves of the Federal Reserve Banks to their combined note and deposit liabilities declined from 78.5 per cent on August 24, 1927, to 69.6 per cent on August 22 of this year. The present ratio for the System as a whole, furthermore, represents an average of the ratios for the twelve Federal Reserve Banks, which range from 46.6 per cent for the Federal Reserve Bank of St. Louis, to 76.5 per cent for the Federal Reserve Bank of Boston. The amount of reserves held by the Federal Reserve System in excess of its legal requirements of 40 per cent against Federal Reserve notes in circulation and 35 per cent against deposits was about $1,300,000,000 on August 22. The amount of gold legally required by the Reserve Banks, however, is measured under present conditions not by their reserve requirements alone, but also by their requirements of collateral against outstanding Federal Reserve notes, which under the law must be covered up to 100 per cent by gold or eligible paper pledged with the Federal Reserve Agent. The volume of Federal Reserve notes outstanding on August 22, i.e., of notes issued by the Federal Reserve Agents to the Federal Reserve Banks, was $2,027,000,000, including about $385,000,000 of notes held by the issuing banks for counter require ments. On that date eligible paper available as colla teral was $1,190,000,000 leaving about $838,000,000 of notes to be covered by gold. In addition a 5 per cent redemption fund must be carried with the Treasurer of the United States against the part of the notes that is not covered by gold; this redemption fund requires an other $60,000,000 of gold. The 35 per cent reserves necessary against deposits would absorb about $814,of reserves, bringing the total of reserve money required by the Reserve Banks to $1,712,000,000. With total reserves amounting to $2,761,000,000 the Reserve Banks thus have more than $1,000,000,000 in gold above their legal requirements. This relatively large amount of surplus gold reflects the fact, however, that the vol ume of eligible paper at the present time is between $400,000,000 and $500,000,000 larger than the average amount for the preceding five years, as the result of the unusually heavy indebtedness of member banks. If member bank borrowings declined to a more usual level, gold would have to be used to replace the liquidated eligible paper as collateral with the Federal Reserve Agents, and this would reduce the amount of surplus 000,000 ELU0N5 ofDOLLARS 19ZT s GOLD STOC: k U .S . i 1— VWW-I J T M A i.......i . M J 1 ...... 1........ t v J A S O N 1vftwv\_ D Stock o f Monetary Gold in the United States, 1928 Compared with 1927. (A ugust 1928, estim ated). T o tal B i lls a n d S e c u r it ie s o f A l l F e d e r a l R e s e r v e B a n k s , C o m p a re d w it h 1 9 2 7 . ( A u g u s t 1 9 2 8 , p r e lim in a r y ) . 192Q 66 MONTHLY REVIEW, SEPTEMBER 1, 1928 gold to between $500,000,000 and $600,000,000, or a little more than was exported during the past year. It is often stated that the Federal Eeserve Banks could increase their surplus gold by paying out Federal Reserve notes and substituting them fo r the gold cer tificates now in circulation. This statement overlooks the fact that collateral will be required against the addi tional Federal Reserve notes put into circulation, and that the entire amount o f gold drawn into the Federal Reserve Banks would thus have to be im pounded with the Federal Reserve Agents as cover fo r the additional notes issued. There would, therefore, be no addition to the surplus gold from this source. Even leaving out of consideration the necessity fo r additional collateral fo r Federal Reserve notes, gold withdrawn from circulation would have but a slight effect on the reserve position of the Reserve Banks, because their liabilities on Federal Reserve notes would increase by the same amount through the paying out o f notes as their reserves would increase through the receipt o f gold certificates from circulation. I f the entire amount o f gold certificates in circulation, which is about $1,000,000,000, were with drawn from circulation and Federal Reserve notes were paid out to replace them, the reserve ratio of the Federal Reserve Banks would advance only from 69.6 to 75.6 per cent. W ithdrawal of such a large amount o f certificates could not be accomplished without considerable delay, and some certificates held in hoards at home and abroad could not be called in. The low point in the circulation o f gold certificates, after several years o f effort to con centrate them in the Federal Reserve Banks, was $170,000,000 in February 1922. It is, therefore, evi dent that, while the Federal Reserve Banks have a considerable volume of excess reserves, or unused lend ing power, this amount is much smaller than is popu larly believed and cannot be materially increased by the device of substituting Federal Reserve notes fo r gold certificates in the cou n try’s circulation. M o n e y M a r k e t in A u g u s t A further gradual advance during August carried the general level o f money rates to new high levels since 1921. The largest increases continued to be in rates on security loans, but there were further moderate ad vances also in rates on commercial paper and on loans made directly to customers by New Y ork City banks. Changes in the various rates during the past month and during the past year are shown by the follow ing table. Money Rates at New York Aug. 31, 1927 Call money................................. Time money-90 day................... Prime commercial paper............ Bills-90 day unindorsed............. Customers’ rates on commercial loans........................................ Treasury certificates and notes Maturing December 15.......... Maturing March 15................ Federal Reserve Bank of New York rediscount rate.............. Federal Reserve Bank of New York buying rate for 90 day bills *3M 4 July 31, 1928 *5M-6 6 *7-8 4 3y8 4% GH 5V2 4% t4.38 f5.09 f5.34 2.61 2.95 4.28 4.32 4.25 4.36 3H 5 5 3H 4H 4H ♦Prevailing rate for preceding week tAverage rate of leading banks at middle of month Aug. 30, 1928 E xcept fo r a temporary break at the middle o f the month, call money held throughout the month at rates varying between 6 and 8 per cent. A s in J uly there was more fluctuation in the call rate than generally in recent years. A ugust 15 provided a striking illustration, fo r after opening at 7 per cent the rate declined rapidly to a closing rate o f 5y2 per cent, and to 4 % per cent on the 16th, follow ed quickly by a rise to a closing rate o f 7 per cent on the 17th. R apid rate fluctuations o f this sort appear to reflect the increased dependence of the Stock Exchange money market on loans from sources other than the New Y ork City banks. Since the begin ning o f May loans to brokers and dealers in securities placed by weekly reporting New Y ork City banks fo r their own account have declined from 1329 million dol lars to 793 million, or from 31 per cent o f the total o f all such loans placed by them to under 20 per cent. O f the 800 m illion dollars which these banks are con tinuing to lend fo r their own account some considerable part is lent to brokers or dealers who are depositing customers and whose loans cannot be called freely. W ith their limited participation in the market, and their overloaned position which makes it necessary fo r them to borrow largely at the Reserve Bank the New Y ork banks cannot well exert their customary influence in stabilizing the market. B il l M arket The supply o f new bills appearing in the market de clined substantially in August. D ealers’ sales continued to be principally to foreign account buyers, but there was some increase in domestic buying, and distribution was wider than in several months. Consequently, dealers’ portfolios remained small throughout the month. A s there was a tendency toward an increase in the proportion o f long maturities among new bills created during the month, dealers around the middle o f the month raised their rates fo r 4, 5, and 6 months bills, but the advance was not maintained in the 4 months maturity, and only partly maintained in the 5 and 6 months datings. Bills o f 30 to 90 day m aturity were offered throughout the month at 4 % per cent. C o m m e r c ia l P a p e r M a r k e t In A ugust as in other recent months the commercial paper market was very quiet. D ealers’ sales were con fined largely to scattered business in small lots among the country banks, and the limited amounts o f new paper appearing in the market gave evidence that com mercial concerns were continuing to finance their re quirements principally through direct borrow ing at their banks. There appears to have been little change in available supplies o f paper since the end o f July, when outstandings through 24 dealers were $483,000,000, an amount 4 per cent smaller than a month earlier, and 14 per cent below the outstandings on July 31, 1927. The upw ard tendency in rates continued, and towards the end of August, the prevailing rate fo r the usual grade o f prime names reached 5y2 per cent. Most dealers reported at that time that there were only a few especially choice names that could still be sold at a rate as low at 5*4 per cent. 67 FEDERAL RESERVE AGENT AT NEW YORK F o r e ig n E x c h a n g e The decline of the foreign exchanges, which has been in evidence since money rates in this country have advanced and was especially rapid during the early summer, continued almost uninterruptedly as concerns most European exchanges during August. Belgian, Italian, Spanish, and Swiss exchanges, however, were able to resist the movement, although the schilling, the belga, and the reichsmark alone continue to be quoted at or above par. Sterling has declined fractionally to $4.8528, which is only slightly above the gold im port point. The French and Dutch exchanges have follow ed a similar course and are in the same position with re spect to their gold points. The announcement of the extension of credits to the Bank o f Spain by English and A m erican banks, to gether with the creation of a governmental bureau fo r the regulation of the peseta exchange, stimulated an advance in the peseta from 16.44 to 16.75 in two days. This movement was quickly checked, however, and the peseta declined to a slightly lower level at 16.60. The other European exchanges moved within very narrow limits. O f the American exchanges, the Canadian and A rgen tine are the only ones which showed any appreciable fluctuation. Since the middle of the month the form er has been at a premium, as it usually is in the late sum mer and autumn. The Indian rupee appreciated fairly consistently throughout August, although it is still be low par. The Japanese yen fluctuated widely, standing at about a 9 per cent discount on A ugust 30. Cable rates Country Austria........................................ Belgium....................................... England....................................... France......................................... Germany..................................... Italy............................................. Netherlands................................ Norway....................................... Spain........................................... Switzerland................................ Canada............. ........................... Argentina.................................... Brazil........................................... India............................................ Japan........................................... Hong Kong, dollar..................... Shanghai, tael............................. August 30, 1927 July 30,1928 August 30,1938 .1407 .1392 4.8617 .0392 .2380 .0543 .4007 .2601 .1685 .1928 1.0000 .9691 .1184 .3616 .4722 * .4819 .60(47 .1409 .1392 4.8576 .0391 .2388 .0523 .4021 .2670 .1645 .1925 1.0004 .9602 .1194 .3620 .4532 .5005 .6534 .1408 .1390 4.8528 .0390 .2382 .0524 .4009 .2668 .1660 .1925 1.0011 .9580 .1193 .3629 .4523 .4983 .6478 per cent on August 24, the last previous increase having been a % per cent rise on A p ril 30. The unfavorable trade balance o f Sweden and the strong position o f the German mark as against the Swedish crown combined in the course o f the year to bring about a reduction in the foreign assets o f the central bank from 240 million crowns at the end o f January to 136 million at the end o f July. G o ld M o v e m e n t In August, fo r the first time in a year, there was a small gain to the gold stock o f this country, as the net result o f exports, imports, and earmarkings. Due to the rapid decline in foreign exchanges since May, gold ex ports in connection with exchange transactions ended some time ago, but, as most o f the leading exchanges have held at least slightly above the levels at which gold could be profitably imported, there has been no evidence o f a return movement o f gold to this country. No special purchases o f any considerable amount o f gold have oc curred in this market since July. Consequently, actual movements of gold during August were the smallest in about two years. The net gain o f gold fo r the month was due to the release o f about $5,900,000 o f gold that had been held under earmark. New Financing Total offerings o f new securities, after maintaining a very high level during the first half o f this year, showed an unusually large decline in July, as the lefthand portion o f the accom panying diagram indicates. The July total would have been much smaller had it not been fo r a substantial amount o f new stock issues offered by the companies directly to their stockholders; public offerings o f new securities were very small as compared either with previous months or a year ago. The second half o f the diagram indicates that a considerable decline in issues o f long-term domestic corporate bonds has been in progress since A pril. The volume o f such securities offered during July was less than half as large as a year previous. MILLIONSo/V0LLAR5 1000 500 1928. N D is c o u n t R a te s A b r o a d A 1 Two increases in central bank discount rates, took place in August. On the 7th the Bank of Finland raised its rate by % P^r cent to 6 % per cent. This is the first swing upward in the discount rate o f this bank since the end o f November 1923, when the rate was 10 per cent. Steadily im proving business condi tions since 1923 made possible a progressive decrease in the rate to 6 per cent on November 24, 1927, the date of the last prior change. The Finnish money mar ket has been tight during most o f this year, and the volume of discounts and rediscounts in the National Bank increased by 42 per cent between January and the end of July. The Bank of Sweden raised its rate from 4 to 4 % / ^ 1927 1 j / 192^V \1927 V \ \ ; rr / V' \ / V 200 LONG- TERM CORP BONDS T O TA L J F M A M J J A S O N D / F M A M J J A S O N D F l o t a t i o n s o f N e w S e c u r i t i e s i n t h e U n i t e d S t a t e s in 1 9 2 8 , C o m p a re d w it h 1 9 2 7 ; T o t a l o f A l l T y p e s o f S e c u r it ie s a n d L o n g - T e r m D o m e s t ic C o rp o r a t e B o n d s ( R e f u n d in g Is s u e s E x c lu d e d ). In A ugust new security issues continued in small vol ume and there was an increase in the proportion of short-term issues. Prelim inary figures indicate that total new financing fo r the month will prove to have MONTHLY REVIEW, SEPTEMBER 1, 1928 68 been the smallest fo r any month in the past 4 or 5 years. The only important domestic issues were offerings by a number of public utilities, generally yielding around 6 per cent. The month was marked by the complete ab sence of public offerings of foreign securities, curtail ment of which was evident in July, follow ing the very large volume floated during the past year. The amount of foreign issues, excluding refunding, offered in this market is shown below : Month 1927 $110,430,800 89,369,500 115.290.000 214.686.000 56,507,375 114,165,000 July.......................................................................... i 89,319,000 August...................................................................... j 110,890,000 January ........................................................ February.................................................................. March ............................................................ 1928 $133,618,000 98,476,000 134,562,000 114,642,750 225,180,000 197,455,087 53,169,400 0 S e c u r it y M a r k e t s Trading on the New Y ork Stock Exchange increased during August and in the last half of the month reached 3 million shares on a number of days, the largest volume since before the June decline. Prices of a number of leading shares were carried upward rapidly to levels considerably higher than those prevailing in May and early June, and averages including large numbers of industrial stocks advanced to levels approximately equal to the M ay and June high points. Railroad shares also showed some rise in prices, but, on the whole, were only slightly higher near the end of August than a month earlier, and averaged about 8 points below the highest levels of the year. Follow ing the substantial declines of the previous three months, corporation bond prices were relatively stable in August, with the trend slightly upw ard in the latter part of the month. United States Government long-term bonds were also much steadier than in July, and average prices at the end of the month were little different from a month earlier. In general, the principal foreign issues showed very slight declines. B u s in e s s P r o fit s Second quarter corporation earnings com pared more favorably with a year ago than did earnings in the first quarter of this year, especially in the oil and steel in dustries. Reports of 222 industrial and mercantile con cerns indicated net earnings about 15% per cent larger than in the second quarter of last year, but it seems probable that this figure exaggerates the increase in corporation profits during the period,— profits o f tire and rubber companies, which have been greatly reduced by the decline in crude rubber prices this year, are not reported quarterly in most cases and therefore could not be included in the tabulation ; and there is a tendency fo r the reports that are issued fairly prom ptly after the close o f a period to include an unduly large proportion of companies whose profits have increased. The largest percentage increase over last year was in the earnings of the oil companies, which during the first quarter of this year were much smaller than in 1927. Other groups to show relatively large increases were the mining and smelting and motor accessories companies. The motor group continued to report the largest actual increase in profits, about three-fourths o f which repre sented the increase in profits o f the General Motors Corporation. Steel companies as a group earned more than in the second quarter o f 1927; and chemical, amusement, machine and machine manufacturing, food and food products, tobacco, and miscellaneous com panies all had larger second-quarter profits than last year. Railroad equipment and building supply com panies, on the other hand, did not earn as much as a year ago. F or the completed half year, profits o f these 222 com panies were nearly 10 per cent larger than in the corre sponding period of 1927, and about 8 per cent larger than in 1926, but these increases also are probably larger than the actual increases fo r all corporations. Net profits o f telephone and other public utility com panies, both fo r the second quarter and fo r the half year, were around 9 to 10 per cent higher than last year. Net operating income of the leading railroads increased slightly more than last year during the second quarter, but still remained somewhat below that o f 1927 and 1926. (Net profits in millions of dollars) Corporation Groups Number Second Quarter First Six Months 1927 1928 1926 1927 1928 Miscellaneous................................. 18 15 25 14 5 26 20 24 9 10 5 6 45 110 8 19 43 5 38 12 15 12 6 3 3 41 131 11 27 45 3 39 13 20 14 4 3 4 49 168 17 78 92 11 65 24 29 20 10 3 6 76 185 15 45 87 10 68 24 30 24 10 5 8 83 225 17 38 81 6 70 25 36 27 7 4 10 103 Total 13 groups........................... 222 315 363 599 594 649 Other public utilities...................... 89 95 59 103 117 Total public utilities.................. 184 Class I railroads............................. 185 Motor accessories........................... Oil.................................................... Railroad equipment....................... Food and food products................ Machine and machine mfg............ Mining and smelting...................... Building supplies............................ 185 65* 128* 203 359 391 429 244 268* 462 508 557* 248 245 496 473 462 * Partly estimated F o r e ig n T r a d e Both exports and imports o f merchandise showed con siderably less than the usual seasonal decline in July. Exports, valued at $382,000,000, continued to exceed the corresponding month o f any year since 1920; the increase over July 1927 was approxim ately $40,000,000. Imports, valued at $316,000,000, however, were slightly less than last year, and were also smaller than in July o f any previous year since 1924. A n analysis o f exports by types o f merchandise shows that, except fo r a decline in crude foodstuffs, chiefly grains, practically all groups o f exports showed in creases over a year ago. Shipments of finished manu factures, which now represent at least one-half of the total exports in value, increased 24 per cent over July 1927; this increase accounted fo r the entire gain in total exports fo r the month. E xports o f crude mate rials, chiefly raw cotton, increased 10 per cent over July last year, despite a decline o f about 12 per cent in the quantity o f the cotton exported during the month, but 69 FEDERAL RESERVE AGENT AT NEW YORK this increase was more than offset by the decline in grain shipments. Imports of crude materials, the largest group among our imports, were $15,000,000 less in value than in July 1927. This decline was the result of reductions in the quantity o f crude rubber and raw silk imported, together with declines in the prices of these commodities amounting to about 45 per cent and 10 per cent, respec tively, during the year. Im ports of finished m anufac tures were $8,000,000 larger than in July 1927, and imports o f crude foodstuffs were $9,000,000 larger. E m p lo y m e n t a n d W a g e s Both in New Y ork State and in the country as a whole, the number of factory workers employed showed slightly less than the usual decrease from June to July. The accom panying chart shows that, while the actual level of factory employment in July was not greatly above that of January, the decline since last spring has been substantially less than usual, and, after allowance for the usual seasonal changes, there has been a consider able improvement since the beginning of the year. PER CENT. 110 105 100 o f July 1927. D uring the first three weeks o f August the daily average amount o f contracts awarded was slightly smaller than fo r the corresponding period of last year. In the New Y ork and Northern New Jersey district, July construction awards were 12 per cent smaller than a year ago, due principally to smaller amounts o f com mercial, industrial, and public works projects. Residen tial building continued larger than last year, and educa tional contracts also were larger. The amount o f con tracts awarded during the first seven months o f this year has been 6 per cent above the total fo r the corre sponding period last year, as com pared with an increase of 8 per cent in the total fo r 37 states. P r o d u c t io n Productive activity in leading industries, after a small decline in June from the fairly high levels o f the preceding fou r months, showed mixed changes in July. M ill consumption o f cotton declined further to the lowest level since September 1924, and there were also decreases, after allowance for the usual seasonal variations, in the output o f anthracite coal and news print paper and in the slaughtering of animals. P ro duction o f iron and steel showed little change, after seasonal allowance, and remained larger than a year ago. Bituminous coal production showed a slight in crease, but petroleum output remained much smaller than last year. Production o f passenger automobiles showed less than the usual July decline, and motor truck production increased substantially. Computed trend of past years = 100 per cent; adjusted for seasonal variations) 1927 95 1928 July May June 102 89 105 84 112 119 74 98 96 98 110 95 92 114 136 98 98 110 113 97 85 115 108 82 110 95 101 93 92 87 112 125 113 99 107 104 88 83 109 106 78 103 93 103 90 97 104 113 130 104 98 106 105 80 77p 110 104p 79 99 92 p 108 101 98 98 76 97 131 84 87 91 99 69 94 103 99 115 104 95 78 100 101 109 82 103 152 148 109 67 96 114 96 106 108 96 122 125 98 99 94 112 76 97 80 66 95 74 95 72 92 101 109 103 120 129 85 86 87 103 73 103 169 138 87 83 July Producers' Goods 90 1925 1926 1927 1928 In d e x o f F a c t o r y E m p lo y m e n t in th e U n it e d S t a t e s , A d ju s t e d S e a s o n a l V a r ia t io n s a n d U n a d ju s t e d ( 1 9 2 1 - 2 4 a v e r a g e = 100 p er c e n t). fo r The continued seasonal expansion in out-of-door activi ties, such as farm ing, building, and road work, is re ported to have more than offset the seasonal slackening in factory work in J u ly ; so that the total volume o f employment increased further during the month. Pig iron...................................................... Steel ingots................................................ Cotton consumption................................. Woolen mill activity*............................... Silk consumption*................... ................. Petroleum.................................................. Bituminous coal........................................ Coke........................................................... Lumber........... .......................................... Copper, U. S. mines................................. Lead........................................................... Zinc............................................................ Tin deliveries................... *....................... Leather, sole.................................. ........... Cement...................................................... Paper, total............................................... W ood pulp................................................. 97 83 123 132 Consumers’ Goods B u ild in g There was a decline of 10 per cent from June to July, partly seasonal, in building contracts awarded in 37 states east of the Rockies in July, but the total was 9 per cent larger than a year ago and was larger than in July of any previous year, according to the F. W . Dodge Corporation. A s in most other recent months, the in crease over last year was due prim arily to a larger amount of residential building. Commercial building programs also were somewhat larger, but contracts for public works and utilities were below the large volume Hogs slaughtered...................................... Cattle slaughtered.................................... Sheep slaughtered..................................... Calves slaughtered................................... Farm produce shipped............................. Wheat receipts.......................................... Corn receipts............................................. Wheat flour............................................... Sugar meltings, U. S. ports...................... Gasoline. ................................................... Anthracite coal......................................... Paper, newsprint....................................... Printing activity....................................... Tobacco products..................................... Boots and shoes........................................ Tires........................................................... Automobile, passenger............................. Automobile, truck..................................... * = Seasonal variation not allowed for p =Preliminary 62 86 105 IlOp 127p 134 128 70 MONTHLY REVIEW, SEPTEMBER 1, 1928 CENTS C rop s H eavy rainfall and high temperatures during the month of July substantially im proved crop prospects, and the composite condition o f all crops reported by the Department o f A griculture was raised from 94.2 per cent o f the ten-year average on July 1 to 103.4 per cent on A ugust 1, probably one o f the largest advances ever made in a single month. Indicated yields o f all o f the im portant crops were increased, in most cases to levels above both last y e a r’s harvest and the average fo r the past five years. The first estimate of the cotton crop indicates a yield about 10 per cent larger than last year, but close to the average fo r the past five years. Comparisons with the five-year average are presented in the accom panying diagram. 1 9 2 3 -2 7 AVERAGE 100% PA RLEY "PEACHES, T&tatcropW WiEATSpnng C o u rse of W heat and Com P r ic e s s in c e Ja n u a ry 1927. POTATOES,(Ohile I n d e x e s o f B u s in e s s A c t i v i t y TEARS ' CORN OATS mXXTMnien POTATOES,Sued JtPPlES,Commt.Crop TOBACCO ME&I CCTTQN wm RICE BEANS,Edihk-dry 'BAY, Tame Sugar beets r ye : 29 C r o p Y i e l d s I n d i c a t e d b y A u g u s t 1 , 1 9 2 8 C o n d it i o n R e p o r t e d U n it e d S t a t e s D e p a rt m e n t o f A g r ic u lt u r e , C o m p a re d w it h 1 9 2 3 -2 7 A v e ra g e H a r v e s ts . by The greatest improvement in crop conditions during July was in the belt extending from Mississippi and Texas to Minnesota, North Dakota, and Montana. In New Y ork State, crop conditions on A ugust 1, although slightly better than on July 1, remained below the average fo r recent years; the fru it crops probably will be substantially larger than the much reduced output o f a year ago, but these, as well as other crops, gen erally are expected to fall short o f the average fo r the past five years. Reflecting the prospects o f larger yields, grain prices have declined rather sharply, as the accom panying dia gram shows. E arlier in the year, when prospects fo r crops were poor, the wheat and corn prices turned upw ard and in A p r il advanced to the highest levels since last summer. The improvement in the wheat crop since M ay, however, has resulted in a substantial de cline in wheat prices to the lowest level since 1924; corn also has declined somewhat, and is below the level o f a year ago. These decreases in prices have to a large extent off set the increase in indicated yields, and make it appear less probable that the farm ing com munity w ill receive a larger total income than last year. The value o f the cotton, tobacco, and barley crops seems likely to be above the level of a year ago, but this may be counter balanced by declines in other im portant farm products. This ban k ’s indexes o f business fo r July continued to show mixed conditions as com pared either with the pre vious month or a year ago. Mail order sales showed less than the usual July decline and were much larger than a year a g o ; average daily car loadings of merchan dise and miscellaneous freight increased somewhat above last y e a r’s volum e; and foreign trade declined less than usual from June to July. L ife insurance sales, and the average daily volume o f department store sales, declined after seasonal allowance, however, and car loadings o f bulk freight remained unchanged at a level below that o f a year ago. (Computed trend of past years=*100 per cent; adjusted for seasonal variations) 1927 1928 July May 1 05 93 104 105 96 104 105 84 Primary Distribution Car loadings, merchandise and misc....... Car loadings, other..................... ............. Exports...................................................... Imports..... ............................................... Panama Canal traffic............................... Wholesale trade........................................ Distribution to Consumer Department store sales, 2nd Dist........... Chain grocery sales................................. Other chain store sales............................. Mail order sales........................................ Life insurance paid for............................. Advertising................................................ 111 96 101 101 108 106 117 109 97 General Business Activity Bank debits, outside of N. Y. City........ Bank debits, New York City.................. Velocity of bank deposits, outside of N. Y. City............................................. Velocity of bank deposits, New York City........................................................ Shares sold on N. Y. Stock Exchange.. . Postal receipts........................................... Electric power........................................... Employment in the United States.......... Business failures....................................... Building contracts, 36 States.................. New corporations formed in N. Y. State Real estate transfers............... ............ General price level................................ Composite index of wages.................... p = Preliminary 100 96 102 98 110 110 95 111 June 101 91 101 99 80 93 103 104 July 1 03 91 109p 102p 83 97 95 97 103 99 132 104 94 102 123 111 108 133 167 114 167 104 142 109 11 7 119 114 135 189 92 106 169 307 92 108 96 1 13 144 177 239 89 106 97 154 1 86 87 121 101 138 127 1 26 176 223 176 100 1 04 122 1 16 97 170 220 121 82 1 77 222 97 86 222 71 FEDERAL RESERVE AGENT AT NEW YORK D e p a r tm e n t S to re T r a d e Total sales o f reporting department stores in this district were nearly 4 per cent larger in J u ly than a year previous, due chiefly to increases in New Y ork City and Newark. In these localities a considerable part of the increase appears to have been due to one more business day than in J u ly 1927; stores in the vicinity o f New Y ork City are closed all day Saturday in July and August, and there were five Saturdays in July last year but only fou r this year. On a daily basis, therefore, the volume o f sales in J uly was about the same as last year fo r the district as a whole. Sales o f large apparel stores continued to show a substantial increase over a year previous. Stocks o f merchandise on hand in department stores at the end o f J uly were about the same as a year ago, and the rate o f stock turnover showed little change. The rate of collections on charge accounts also was about the same as in July 1927. Per cent of Accounts Outstanding June 30, Collected in July Percentage Change July 1928 compared with July 1927 Locality Net Sales New York..................................................... Buffalo........................................................... Rochester...................................................... Syracuse........................................................ Newark.......................................................... Bridgeport..................................................... Elsewhere....................................................... Northern New York State....................... Central New York State......................... Southern New York State....................... Hudson River Valley District................. Capital District......................................... Westchester District................................. + 4.8 — 1.3 + 3.4 — 3.5 + 6.6 + 2.0 — 4.1 — 3.4 —20.3 — 5.4 — 5.2 + 2.0 -f- 4.6 All department stores................................... -f 3.6 Apparel stores............................................... Mail order houses......................................... + 8.8 + 20.4 Stock on hand end of month 1927 1928 46.4 49.1 36.4 46.2 50.9 39.9 43‘.8 44'.i 33! 2 36^2 + 0.3 44.8 45.1 + 5.8 44.3 44.7 + — + — + — — 1.0 1.5 3.9 2.0 0.4 4.7 3.7 Comparisons o f sales and stocks in m ajor departments with those of a year ago are given in the follow ing table. Musical instruments and radio. . Shoes............................................. Toys and sporting goods............ Books and stationery.................. Men’s furnishings........................ Cotton goods................................ Women’s ready-to-wear accessories Toilet articles and drugs............. Home furnishings........................ Silverware and jewelry................ Luggage and other leather goods Women’s and Misses’ ready-to-wear Linens and handkerchiefs........... Men’s and Boys’ wear................ Hosiery......................................... Silks and velvets.......................... Furniture...................................... Woolen goods............................... Miscellaneous............................... Net Sales Percentage Change July 1928 compared with July 1927 Stock on Hand Percentage Change July 31, 1928 compared with July 31, 1927 + 61.4 + 15 .7 + 11 .6 + 9.1 + 9.0 + 7.2 + 6.6 + 6.1 + 5.1 + 3.9 + 1.3 + 0.8 + 0.5 — 0.2 — 1.5 — 3.8 — 5.4 —42.5 — 5.9 —27.0 + 6.1 +16.0 +18.4 — 3.1 + 5.2 + 4.4 + 5.3 + 6.6 + 1.6 — 11.0 — 5.4 + 0.6 +16.2 + 3.9 +11.9 + 0.4 — 5.2 0 C h a in S t o r e S a le s Sales o f reporting chain store organizations in this district in general showed a smaller increase over last year in July than in June. The one exception was the grocery trade, where the increase was somewhat larger than in June. This was the only line in which, after making allowance fo r the increase in the number o f units operated, sales per store were larger than a year ago. The decreases in sales per store in other types o f chains varied from 2 % per cent in drug chains to nearly 16 per cent in candy chains. Percentage Change July 1928 compared with July 1927 Type of Store Number of Stores Total Sales Sales per Store + 1.4 + 8.3 + 3.6 + 3.4 + 9.3 +18.6 +18.6 +10.4 + 5.0 + 1.0 — 9.5 + 4.6 +14.9 — 0.1 + 9.0 — 3.1 — 2.5 — 12.5 — 4.3 — 3.1 — 15.7 + 5.0 + 5.9 + 0.8 Grocery................................................... Ten cent.................................................. Drug........................................................ Tobacco................................................... Variety.................................................... Candy...................................................... W h o le s a le T r a d e Sales o f reporting wholesale dealers in general com pared more favorably with those o f a year ago in J uly than in June. The weighted total fo r all lines covered by the reports in this district was about equal to that o f July 1927, whereas the June total was 7 per cent below that o f a year ago. Sales o f w om en’s coats and suits reflected the begin ning o f the autumn season, and were larger than a year previous fo r the first time this yea r; m en ’s cloth ing sales also showed a seasonal increase but remained smaller than last year. A n increase o f more than 50 per cent in machine tool sales was again reported by the Machine Tool Builders Association, and smaller in creases were reported in sales o f stationery, shoes, diamonds, paper, drugs, and groceries. Cotton goods sales were about the same as a year ago, but silk goods sales were considerably smaller, and jew elry and hard ware sales showed small declines. Stocks o f silk goods reported by the Silk Association showed a further increase over last year, and stocks o f drugs and hardware also showed substantial increases. The principal decreases were in stocks held by shoe and cotton goods jobbers. Commodity Percentage Change July 1928 compared with June 1928 Net Sales Groceries...................... Men’s clothing............ Women’s dresses......... Women’s coats and suits Cotton goods—Jobbers Cotton goods — Commissionw.................... Silk goods. ................... Shoes............................. Drugs........................... Hardware..................... Machine tools**.......... Stationery.................... Paper.............. ............ Diamonds.................... Jewelry......................... — 4.8 +75.3 — 11.8 +400.5 — 2.0 Weighted Average... +44.9 Stock end of month + 5.0 + 2^4 Percentage Change July 1928 compared with July 1927 Net Sales + 1.1 — 13.4 — 10.5 +11.3 + 0.1 Stock end of month — 5.8 1927 1928 70.5 40.9 71.1 36.4 49^2 40.7 39 2 46.2 5i*6 39.3 42.3 45.4 68 i 63.2 J 24.2 68!7 61.8 \ 23.9 51.3 50.7 — 17‘.7 — 14.2 + 0.2 — 9.7 + i'.l* — 16.9 +25 !o* — 2.7 + 5.4 — 18 6 + 1.9 — 0.3 + 12.2 + 2.4 +14.0 — 19.1 + 1.4 — 4.4 +12.6 — 4.9 +57.7 — 1.7 +13.0 — 6.1 + 3.9 — 23.6 + 4.2 — 39.2 }— 2.0 — 3.3 } + 3.3 0 Per cent of Accounts Outstanding June 30 Collected in July ♦Quantity not value. Reported by the Silk Association of America. ♦♦Reported by the National Machine Tool Builders’ Association. MONTHLY REVIEW, SEPTEMBER 1, 1928 72 Business C on ditions in the U n ited States (Summarized by the Federal Reserve Board) NDUSTRIAL and trade activity was in larger volume in July than is usual in midsummer and the general level of commodity prices advanced slightly. Member bank holdings of securities and loans on securities declined in July and August, while all other loans increased to the highest level since 1921. Conditions in the money market remained firm. I P r o d u c t io n In d e x N u m b e r o f P r o d u c t io n o f M a n u f a c t u r e s a n d M in e r a ls , A d ju s t e d fo r S e a s o n a l V a r i a t io n s ( 1 9 2 3 - 2 5 a v e r a g e — 1 0 0 p e r c e n t ) . P ERCEN T Production of manufactures and minerals showed a smaller decrease than usual in July, and the index of industrial production, which makes allowance for seasonal variations, advanced. Production of steel, bituminous coal, petroleum, automobiles, and footwear was larger in July than in June, while activity in textile mills, meat packing, and copper and anthracite mines declined. Lumber production showed less than the usual seasonal decrease. Steel mill activity, while during July was at an unusually high level for the summer season, was well maintained during August. Weekly reports from Detroit factories show a larger volume of employment in the middle of August than at any previous date, indicating that automobile production continued large in that month. Building contracts awarded de clined by somewhat more than the usual seasonal amount in July, but were larger than in any previous July, the increase over last year being chiefly in residential building. Contracts awarded in the first two weeks in August were slightly smaller than in the same period of last year. Estimates of the Department of Agriculture as of August 1 indicate considerable improvement in crop conditions during July. Estimated wheat production was 891,000,000 bushels, larger by 91,000,000 than on July 1 and slightly larger than the yield in 1927. The corn crop is expected to be more than 3,000,000,000 bushels, an increase of 250,000,000 bushels from last year. Forecasts for other grain crops were also larger than the July 1 estimates and in most cases exceeded last year *s yields. The August 1 forecast of cotton production was 14,290,000, as compared with yields of 12,955,000 bales in 1927 and nearly 18,000,000 bales in 1926. T rade W h o le s a le P r i c e In d e x o f U n it e d S t a t e s B u r e a u of L a b o r S t a t is t ic s (1 9 2 6 a v e ra g e = 100 p er c e n t). Distribution of commodities at wholesale and retail was in large volume 4n July. Sales of dry goods and shoes at wholesale were larger than in June, and those of other lines were only slightly smaller. Department store sales, after allowance for seasonal changes, increased in July. Compared with July a year ago, trade of both wholesale and retail firms was larger. Stocks of department stores and of wholesale firms continued smaller than a year ago. Freight-car loadings increased by more than the usual seasonal amount in July and for the first time this year were larger than in the corresponding month of 1927. Increases, compared with last year, were reported in loadings of miscellaneous commodities and of grain, reflecting the early harvesting of the crop this year. The largest decrease, as compared with a year ago, was in livestock shipments. During the first two weeks in August, total loadings were in about the same volume as in the corresponding weeks of last year. P r ic e s M o n t h ly A v e r a g e s o f W e e k ly F ig u r e s fo r M e m b e r B a n k s in 101 L e a d in g C it ie s ( L a t e s t F ig u r e s a re A v e ra g e s fo r 3 W e e k ly R e p o r t D a t e s in A u g u s t ) . W eekly Rates in the New Y ork Money Market. The general level of wholesale commodity prices increased slightly in July reflecting chiefly advances in the prices of livestock and meats, although there were also small increases in hide and leather products, textiles, petroleum products and building materials. There was a sharp decline in the price of grains, other than corn, and some decrease in chemicals and drugs, silk, rubber, and automobile tires. During the first half of August there were increases in the prices of sugar, hogs and pork products, coke, and lumber, and decreases in grains, cotton, wool, and hides. B a n k Cr e d it Between July 18 and August 15 total loans and investments of member banks in leading cities decreased by about $130,000,000. This decline reflected a considerable reduction in investments, chiefly at banks in New York City, and some further decline in loans on securities. All other loans, which include loans for commercial purposes, showed a small seasonal increase and at the middle of August were in the largest volume since early in 1921 and nearly $230,000,000 larger than at the autumn peak of last year. There was a further large decline in net demand deposits, and practically no change in time deposits. Volume of Reserve Bank credit outstanding showed little change between July 25 and August 22. Discounts and acceptance holdings increased slightly while United States security holdings were practically unchanged. Increased demand for currency, which is usual at this time of the year, has not resulted in an equivalent growth in Reserve Bank credit, because it was offset in part by a decline in reserves required by member banks, which reflected the decrease in their deposits. There were further increases between the middle of July and the middle of August in Open-market rates on collateral loans, commercial paper, and bankers acceptances.
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