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MONTHLY REVIEW of Credit and Business Conditions S e c o n d F ederal R eserve A g e n t F e d e r a l F ederal R eserve Bank, N ew Y ork M o n e y M a r k e t in A u g u st Excess reserves of the principal New York City banks remained comparatively small during the first half of August but subsequently increased substantially to about $150,000,000, and open market money rates in New York declined to levels even lower than those reached in June, and about as low as in January and early February. For all other member banks throughout the country excess reserves remained around $450,000,000, and the total for the entire country, therefore, rose above $600,000,000, and about equaled the high level reached early last January. The distribution has changed materially since January, however, a large part now being distributed throughout the country, whereas in January at least half was concentrated in New York. The increase in the excess reserves of New York banks during the latter half of August was due partly to an expansion i” Reserve Bank purchases of Government securities. For a number of weeks purchases had been made at the rate of about $10,000,000 a week, following purchases varying from around $20,000,000 to $25,000,000 for several weeks in May and June. In the third week of August the amount of Government securities purchased by the System was increased to $35,000,000, and in the fourth week a like amount was purchased. The total loans and investments of principal New York City banks showed greater stability during August following a decline in July. In other principal cities also the amount of member bank credit outstanding showed no material change in August, following a rather substantial increase from the middle of June to the end of July. The failure of bank credit to expand in the face of mounting excess reserves and increasing business activity may, however, be attributed at least in part to the further effect of the discontinuance of interest pay ments on demand deposits. In the four weeks ended August 23 the demand deposits of reporting member banks declined $220,000,000 to a volume $800,000,000 less than on June 14, just before the passage of the Banking Act of 1933 which made discontinuance of interest payments on demand deposits mandatory. Idle demand deposits have sought investment in United States Government securities and other high grade securities of short maturity, and this has tended to pre vent further accumulation of such securities in bank portfolios and even to cause some decline. The Govern ment security holdings of the reporting banks declined about $150,000,000 between June 21 and August 23, R e s e r v e D is tr ic t Septem ber 1 ,1 9 3 3 notwithstanding large purchases of new Government securities, especially those issued on August 15. There are indications, however, that the reduction in demand deposits has not meant a corresponding reduc tion in the amount of money in active use. It has reflected rather a tendency of corporations and others to invest deposits not immediately needed, and to use the remaining balances more intensively. This is reflected in the accompanying diagram, which shows the velocity or turnover of demand deposits in the principal cities for a number of years past. As this indicates, the activity of deposits following an extraordinary rise from 1925 to 1929 declined to between 50 and 60 per cent of the 1919-1925 avenge at the end of 1932. Subsequently there has been a rapid rise to about 85 per cent of the average for 1919-1925, the highest rate since the middle of 1931. This increase in the turnover of deposits has reflected not only a reduction in idle deposits, but also an increase in the volume of checks drawn against the remaining deposits, accompanying the improvement in general busi ness conditions during recent months. Thus far the recovery in business appears to have been financed largely through more active use of the existing money supply, although there has also been a fairly substantial increase in deposits since March, resulting partly from expansion of bank credit and partly from the return of hoarded currency. The volume of currency outstanding, which had de clined almost without interruption from the end of the PER CEN T R ate o f T u rn ov er o f D em and D eposits in Principal C ities (F ed eral R eserve B ank o f N ew Y o rk index) MONTHLY REVIEW, SEPTEMBER 1, 1933 66 bank holiday to the latter part of July, has shown little net change during the past month. In view of the fact that the seasonal increase in currency circulation usually begins in August and that payroll requirements are in creasing, due to improving business and higher wage scales, however, it would appear that the return flow of money out of hoards has not ceased, although it has prob ably been less rapid accompanying the slower pace in the security and commodity markets. As a diagram on a later page of this Review indicates, the number of wage earners receiving increases in their rates of pay during June and July was far greater than in any other month in several years. It appears that this movement has con tinued subsequently and has tended to increase payroll requirements further during the past month. M oney C o m m e r c ia l P a p e r M R ates Money rates declined somewhat in August, especially in the latter half of the month accompanying the rise in excess reserves of New York banks, and in most cases reached the lowest levels of the year. Rates for accept ances of maturity exceeding 45 days were reduced % per cent, and short bills declined Ys per cent. Yields on short term Government securities were reduced ma terially, and quotations on 90 day Stock Exchange loans decreased about Y2 per cent during the month. On August 30 the Stock Exchange quotation for call money, which had held for some time at 1 per cent, was reduced to % per cent. A comparison with rates prevailing at the end of July and with those of a year ago follows. M oney'R ates at NewpTork Aug. 31, 1932 July 31, 1933 Aug. 31, 1933 Stock Exchange call loans........................ Stock Exchange 80 day loans................. Prime commercial p ap er......... ................ Bills— 90 day unindorsed......................... Customers’ rates on commercial loans.. Treasury securities Maturing December (y ield )................ Maturing March (y ield )...................... Federal Reserve Bank of N. Y . redis count ra te................................................ Federal Reserve Bank of N. Y . buying rate for 90 day indorsed b ills............. * Nominal 2 1 * l M -i H 2 -2 M % f4 .1 3 * i h - i y2 iy 2 f3 .2 4 % *% iy 2 H t3 .1 9 0 .09 0.2 6 0 .08 0 .4 0 No yield O .ll 2Y2 1 2 1 ^ 1 t Average rate of leading banks at middle of month B il l M a r k e t A strong and widespread investment demand for bankers acceptances existed throughout the entire month of August. New York City banks, out of town banks, and corporations were in the market for bills, and as accepting and discounting banks retained new bills that came into their possession, the dealers were unable to fill orders. By the third week of the month the port folios of the dealers were reduced to the lowest figure in the history of the bill market and effective August 23 open market rates for bills maturing in 46 days to 6 months were reduced Ys per cent. This reduction re stored all bill rates to the levels which had prevailed prior to the increase of early July, quotations for the short bills having reverted to their former level shortly after they were increased in July. On August 30, the dealers made a further general reduction of Ys per cent in their rates; the offering rate of Y± Per cen^ established on 90 day bills equaled the low which prevailed for a short time early this year. During July, the volume of bankers acceptances out standing rose $51,000,000 further to $738,000,000, and at that figure was above the level of the previous year for the first time since June 1931. An increase of $36,000,000 in bills arising from domestic warehouse credits was again the largest factor in the rise, although there were also increases of $6,000,000 in import bills and in bills based on goods stored in or shipped between foreign countries. There was a large increase during July in holdings of bills by accepting banks, both in New York City and outside, and there was also a further material rise in holdings by corporations. Accompanying these increases, which were about twice as large as the rise in the volume of bills outstanding, Federal Reserve hold ings of bills and the amount held in dealers’ portfolios declined considerably. arket A further increase in the demand for accommodation by commercial and industrial concerns eligible to use the facilities of the open market resulted in a continued rise in the amount of commercial paper outstanding through dealers reporting to this bank. The total of $97,000,000 on July 31 showed an increase of 33 per cent for the month and raised outstandings to the highest level since last November. Drawings of new paper dur ing August continued to be readily absorbed by the in vestment demand, and in fact orders received from banks by the dealers considerably exceeded the paper which was available. Most of the prime paper continued to be sold during August at 1 Y2 per cent, with some business also transacted at 1 % per cent. Security M a rk e ts The stock market showed a rising trend in August, although daily movements were somewhat more irregular than in preceding months. As a result representative averages of general prices by the end of August had recovered more than one-half of the loss sustained in the sharp reaction between July 18 and 21. Industrial and railroad stocks accounted for all the rise in the general price averages, these types of shares recovering to within 7 to 8 per cent of their July highs, while public utility stocks showed little net change for the month of August and remained about 20 per cent below the peak reached in July. In comparison with the turnover of immediately preceding months, stock trading was rather dull in August. Trading on the New York Stock Exchange averaged less than 2 million shares daily, although activity tended to increase somewhat toward the end of the month. In contrast to the net advances in stock prices, domes tic corporation bond averages showed slight declines for August, remaining about 2 points below their July highs. Nevertheless, at present levels, domestic corporate bond averages composed principally of high grade issues have recovered more than 65 per cent of their declines during the 1930-1932 period, and averages having a larger representation of lower grade issues have recovered over 50 per cent of the ground lost in the 1930-1932 slump. Recently the higher grade issues have continued to in crease in price or to hold steady, while the second grade issues have declined slightly from their July highs. Foreign dollar bonds showed a small net decline dur ing August. United States Government bonds, in keep 67 FEDERAL RESERVE AGENT AT NEW YO R K ing with other high grade bonds, advanced slightly for the month. Liberty Loan issues rose about % of a point and long term Treasury bonds about % of a point on the average, with the new 3^4 per cent Treasury bonds floated August 15 going to a premium of over 1 point. N e w F inancing Public offerings of new securities during July totaled $169,000,000, of which $124,000,000 represented new capital issues and $45,000,000 refunding issues. Domes tic corporate financing accounted for $53,000,000 of the new capital issues, a Federal Intermediate Credit Bank issue for $35,000,000, State and municipal offerings for $28,000,000, and a foreign issue for $7,000,000. While new capital issues during June and July were somewhat larger than in immediately preceding months, the total for the first seven months of this year at $403,000,000 was less than one-tenth of the average of $4,328,000,000 of new capital flotations during the first seven months of the years 1926-1928. Furthermore, the larger part of this year’s total represented State and municipal financing, so that it appears that the flow of new capital to industrial enterprises during this period was at a very low level. Between July 7 and August 29, registration state ments of security issues filed with the Federal Trade Commission under the Securities Act of 1933 totaled approximately $183,000,000. This aggregate amount represented to a considerable extent proposed issues by investment companies, including investment trusts, con cerns selling corporate trust shares, mortgage companies, and small loan companies. While the registrations also included a number of issues of mining, brewery, and miscellaneous industrial concerns, there were no issues of important size to indicate an acceleration of the rais ing of new capital funds in the securities markets for the use of industry. According to preliminary data, new security issues actually announced by public advertise ments during August totaled less than $50,000,000, com posed entirely of State and municipal financing. U n it e d S tates T reasu ry F F oreign E xch ange Following a rather consistent advance in the second half of July during which time the discount on the dollar was reduced from 31.3 per cent to 25.8 per cent, the dollar fluctuated within a range of 25 to 27 per cent discount from the French franc through August 22. In the next three days the discount widened suddenly to 31.1 per cent, and although the dollar again strengthened somewhat thereafter, by August 31 it had recovered only partly to a discount of 29.8 per cent. In the first three weeks of the month all of the major foreign currencies moved in rather close concordance, advancing or declining together against the dollar. In the latter part of the month, however, the pound sterling showed weakness in terms of the gold currencies, and in London the price of sterling declined to between 81 and 82 francs, as compared with a price range of about 85% to 88 francs which had prevailed earlier this year. Closing Cable Rates at New York Exchange on Italy.................................... Par of Exchange $ .1390 .2680 4.8666 .0392 .2382 .4020 .0526 .2680 .1930 .2680 .1930 1.0 000 Brazil.................................. .9648 .1196 1.0342 .4985 .3650 in a n c in g On August 15, the Treasury sold a total of $1,189,000,000 of new securities, partly to replace a maturity of $469,000,000 of certificates of indebtedness. The re cent financing was composed of $835,000,000 of 3 % per cent Treasury bonds due in 1941, and $354,000,000 of 1 % per cent Treasury notes due in August 1935. Under the terms of the Treasury offering, cash subscriptions to the bonds and notes for amounts up to and including $10,000 were allotted in full, and subscriptions for which payment was tendered in certificates of indebted ness maturing August 15 were given preferred allot ment. Also subscriptions to the bond issue for which pay ment was tendered in certificates of indebtedness matur ing September 15 were allotted in full. In accordance with the exchange provisions a total of $238,000,000 of the August 15 certificates of indebtedness were ex changed for the new bond and note issues, leaving $231,000,000 to be redeemed for cash, and $231,000,000 of certificates of indebtedness due September 15 were ex changed for the new bond issue, reducing the maturity to be met on September 15 to only $220,000,000. Both issues were heavily oversubscribed and immediately sold up to substantial premiums. In addition to the securities floated on August 15, five Treasury bill issues, totaling $371,000,000, were put out to replace corresponding maturities. Rates on this type of financing ranged downward from 0.35 per cent on the August 2 issue to 0.14 per cent on the August 30 issue. Aug. 31, 1932 July 31, 1933 Aug. 31, 1933 $ .1387 .1780 3.4700 .03920 .2379 .4023 .0513 .1740 .0804 .1783 .1938 $ .1885 .2 0 1 0 4.4800 .05280 .3222 .5440 .0709 .2252 .1128 .2315 .2610 $ .1990 .2025 4.5275 .05578 .3395 .5730 .0748 .2275 .1190 .2335 .2748 .8963 .5865 .0763 .4750 .9300 .7756 .0829 .6000 .9500 .8193 .0839 .6600 .2288 .2628 .3156 .2770 .3380 .2850 .2681 .3410 .2875 G o ld M o v e m e n t During the month of August there was an increase of about $8,000,000 in the monetary gold stock of the United States, due principally to the release of $6,249,000 of gold held by a New York bank for foreign account. Exports of $73,200,000 to France, $6,500,000 to Czechoslovakia, and $200,000 to Germany, represented the release and shipment of gold previously held under earmark, which had no effect on the gold stock of this country; in addition, approximately $425,000 of gold was exported to France under license of the Secretary of the Treasury. Imports were negligible. Central B a n k R a te C hanges Following two reductions of one-half per cent each in July, the Netherlands Bank reduced its discount rate on August 15 from 3 y 2 to 3 per cent. On August 16 the Bank of Java rate was lowered from 5 to 4 % per cent. 68 MONTHLY REVIEW, SEPTEMBER 1, 1933 C orporate E arnings in F irst H a lf of 1 9 3 3 (Net profits in millions of dollars) Reflecting the recovery which occurred in business volume and prices during the second quarter of 1933, the earnings reports of industrial and mercantile con cerns for the April to June quarter made the most favor able aggregate showing since the third quarter of 1931. This is indicated in the accompanying diagram which compares quarterly net profits of a list of 163 represen tative corporations over the past 4 % years. All reports available at this time for the second quarter of the last three years are summarized in the following table. As this shows, the greatest percentage improve ment in profits between the second quarter of 1932 and the corresponding period of 1933 was in the automobile, automobile accessory, household equipment, office equip ment, and aviation companies. More than two-thirds of the groups of companies improved their earnings position over last year, either increasing their net profits, or converting deficits into profits, or reducing losses, and aggregate net profits for all groups were nearly five times as large as in the second quarter of 1932, although they remained considerably below 1931. For the first half of 1933, reports of 435 companies are available, a larger number than for the second quarter, since many concerns publish half-yearly but not quar terly reports. These reports indicate total net profits more than twice as large as a year ago, although still far below the total for the first half of 1931. Twelve of the 27 groups shown in the table did not improve their half-yearly net profits over those reported last year, owing in part at least to the very poor showing during the first quarter. The improvement in the earning power of the railroads paralleled that of the industrial concerns, as is indi cated by the second part of the diagram. Net operating income of the Class I railroads in the second quarter was between two and three times as large as in 1932, with the result that the total for the first half year was about 40 per cent ahead of last year, although in the first quarter net operating income was only half as large as in 1932. The telephone and other public utility companies, however, reported a smaller return this year than last, both in the second quarter and in the first six months, according to reports available at the present time. Num ber of com pa nies MILLIONS OF COLLARS MILLIONS OFQOLLARS ) 529 500 1 / ' \ . \ 400 — N l i 3 30 x 300 \ 931 ) r v 193 3 / \ \ 200 \ 100 \ J?*1 ) INDUS,T R IA L ' ..... ...... j 1ST 2N D 3RD 4TH 1ST 2ND 3R D 4TH Q uarterly N e t Profits of 1 63 Industrial and M ercantile Corpora tions, and N e t Operating Incom e o f C lass I Railroads Corporation groups Mining and smelting (excl. copper, coal and co k e )................. Household equipment. Clothing and textiles.. Automobile parts and access, (excl. tires).. Office equipm ent......... Leather and shoes. . . . Shipping........................ Chemicals and drugs.. Food and food prod.. . Printing and pub........ M otion picture and amusement............... Building supplies......... S teel............................... Second quarter 1931 1932 13 6 1.5 1.4 6 6 1.1 1 .0 — 0.2 — 1.5 12 6 5 5 .0 1.8 1.4 — 0 .3 — 0.8 2.6 0.2 ‘6 i ’. i 18 37 4 41.9 3 .7 0 .5 7 .2 3 1.0 19 4 7 7 .9 — 1 . 0 12.0 24 36 i i *8 — 27.9 2 3.3 Total f2 4 — for 2 nd quar.l ^27 — for 1 st half J .. 294 165.2 19.7 103 72.3 50 79.5 Total public utilities 153 Class I railroads {net operating in co m e ). . 150 Telephone (net operat ing incom e)............... Other public utilities (net earnings).......... 9 5 '8 15 9 9 9 6.6 17 1.3 0 .4 8 22 5 .5 1.4 39 ’ 6 ’.4 8 .4 31.8 0 .3 2.1 3 .2 2 .3 1.4 0 .7 1.5 — 1 . 8 8 . 2 — 36.3 0 .5 — 0 . 8 0 — 1.5 1 . 8 — 2 .4 2 .7 — 1.5 — 0 .7 — 1.3 Coal and co k e .............. M achinery. .................. Railroad equipment.. . C op p er.......................... Rubber and tires......... Electrical equipm ent.. O il.................................. Miscellaneous............... 12 47.9 0 .3 2 .9 0 .2 31 7 2 6 11 1933 Num ber of com pa nies 0.6 0.6 0.2 — 14.2 — 0 .5 — 1.4 — 2 .3 — 1.6 — 1.2 0 .5 0 .3 13.6 — 6 .5 7 .8 15.6 8 6 8 22 45 8 2 7 17 22 4 9 21 12 6 6 12 First six months 1931 1932 8 9.5 2 .9 2 .4 1.2 — 1.8 13.0 2.1 0 1933 4 3.8 0 .5 2 .7 7 .5 11.3 3 .7 1.4 — 1 . 6 — 0 .9 — 15.3 10.1 0 .2 13.3 — 7 .2 1.4 5 .6 2 .9 5 .6 0.8 — 0 .2 28.7 18.3 100.3 7 4.5 10.7 5 .8 0 .4 2 .5 4 .6 8.0 6.0 1 .4 0 16.9 65.9 2 .3 2 .2 2 .7 1.2 5 .2 — 5.1 14.7 — 6 7.7 1.3 — 1 . 0 1 . 0 — 3.1 5.1 — 6 .5 6 .3 — 3 .8 — 0 .9 — 2 .3 1.7 — 4 .2 20.2 0 .4 — 2.0 — 50.3 — 0 .9 — 3 .2 — 7 .4 — 5 .1 — 3 .3 — 6.1 2 . 8 — 1.9 1 2 . 6 — 33.8 31.1 21.1 30 62 — 39.7 67.5 96.8 435 376.5 3 5.0 51.2 47.1 103 141.8 102.0 88.5 68.9 60.7 50 168.3 148.5 125.4 151.8 120.1 107.8 153 310.1 250.5 213.9 129.2 44.2 119.2 150 235.4 109.6 152.9 7 8.5 In dexes of Business A c tiv ity A moderate recession appears to have occurred in primary distribution of goods since the middle of July, but the distribution of goods to consumers, which had tended to lag, appears to have improved moderately. Two of the best measures of general business activity— the railroad movement of less than carload and miscel laneous freight, and electric power production — are shown in the accompanying diagram. From March to July the index of freight traffic rose 30 per cent, while that of electric power output advanced 21 per cent, and in both cases the July levels were the highest since early in 1932. These gains were of longer duration and larger magnitude than any previous advance during the last four and a half years, as the diagram shows, and the recession which has occurred since the middle of July has offset a relatively small portion of the rise. In contrast to these declines, the dollar value of department store sales in the New York Metropolitan area during the first half of August was 3 per cent larger than in the corresponding period a year ago, which represents the first year to year increase in the daily average rate of sales since the middle of 1930. For the month of July as a whole, increases over June were shown by a large majority of this bank’s season ally adjusted indexes of trade and business activity. Among the principal series, increases occurred in freight FEDERAL RESERVE AGENT A T N EW YO R K INDEX W e e k ly Indexes o f E lectric Power Production and L o adings o f M iscellaneou s and L e ss than Car Load F reigh t (Fed eral R eserve B ank of N ew Y o rk indexes ad ju sted for usual seasonal m ovem ent and long tim e grow th ) traffic, foreign trade, department store and wholesale trade, chain store trade other than grocery sales, pas senger automobile registrations, volume of check trans actions, and electric power production. In addition, business failures declined more than is usual in July. There were only minor decreases in a few lines. Most of the indexes in July were at a considerably higher level than in July 1932. (Adjusted for seasonal variations, for usual year to year growth, and where necessary for price changes) 69 March to July, and in the steel industry operations dur ing the second half of the month declined 10 points to 47 per cent of capacity, after having been maintained during the first half of August at about the same level as in the latter part of July. The production of auto mobiles, however, appears to have been well maintained. In July, productive activity rose sharply for the fourth consecutive month, with the result that the Federal Re serve Board's seasonally adjusted index increased 8 per cent to 98 per cent of the 1923-25 average. A t this figure the index was 38 points, or 63 per cent, above the March level and was at about the average level of 1930. Large increases from June to July, both before and after sea sonal adjustment, occurred in the production of pig iron, steel, zinc, bituminous coal, and building materials, and in the activity of wool mills, and the output of auto mobiles was reduced considerably less than usually. Con sumption of cotton and production of shoes showed little change other than seasonal, but consumption of silk and the output of lead and tobacco were substantially reduced. (Adjusted for seasonal variations and usual year to year growth) 1932 1933 July M ay June July 19 21 28 29 41 25 41 32 40 71 39 64 38 46 85 59 85 32 61 25 28 33 48 45 66 50p 70p 50r 55 r ser es 70 60r 47r 42r 82 68 69r 71r 52 r 81 71 82r 68r 65r 79p Metals Steel ingots.......................................................... Tin deliveries...................................................... Automobiles 1932 Passenger cars.................................................... M otor trucks...................................................... 1933 Fuel» Primary Distribution Car loadings, merchandise and m isc.r. . . Car loadings, oth er...................................... E xp orts............................................................ Im ports........................................................... W aterways traffic......................................... Wholesale tra d e............................................ Distribution to Consumer Department store sales, 2nd dist.............. Chain grocery sales...................................... Other chain store sales................................ M ail order house sales................................. A dvertising..................................................... Gasoline consumption r .............................. Passenger automobile registrations.......... General Business Activity Bank debits, outside of New Y ork C ity.. Bank debits, New York C ity ..................... Velocity of bank deposits, outside of New Y ork C it y ............... .................................. Velocity of bank deposits, New Y ork C ity Shares sold on N. Y . Stock E xch an ge. . . Life insurance paid f o r ................................ Electric p ow er............................................... Employment in the United S tates........... Business failures............................................ Building co n tr a c ts ....................................... New corporations formed in N. Y . State. Real estate transfers r ................................. General price level*...................................... Composite index of w ages*........................ Cost of liv in g *............................................... p Preliminary r Revised July M ay June July Bituminous ooal r ............................................. Anthracite coal r ............................................... 51r 41 43 53 31 77 54r 48 43r 53 46 99 58 r 60r 63 57 p 77 p Petroleum, crude............................................... Petroleum products.......................................... 47 64 55 lOOr 73 72 76 69 72 60 71 66 51 55 6 8r 29 72r 36 71 60 75 65 54 81r 47p 65 61 57 53 62 58 81 61 75 74 68 60 133 27 91 51r 73 52 231 64 66 62 84 15 85 45r 129 179 139 127 172 127r 55 112 73p 58 79 p 66 53 67 67 p Cotton consumption........................................ W ool mill activity............................................ Silk consumption............................................... 56 64 82 77 104 104 82 114 120 133 88 122p 119 151 79 124p 87 85 94r 80r 105 101 93r 94r 110 98r 77 r 88 r 113 94 75r 79r 45 55 30 64r 72 37 62 33 57r 71 43 77 42 59r 77 48 Foods and Tobacco Products Livestock slaughtered..................................... W heat flour......................................................... Sugar deliveries r .............................................. Tobacco products r .......................................... 50p Miscellaneous . 78 62 310 67 69p 66 76 19 85 47r 90 75 375 128 173p 128r 132 175p 71p 7 lp 72 70 17 83 * 1913 average= 1 0 0 P rodu ction During August a moderate recession from the com paratively high levels reached in July occurred in the output of a few of the leading industries. Activity in the cotton textile industry was reported to have declined somewhat, following the extraordinary expansion from Textiles and Leather Products Lum ber................................................................. Printing activity r ............................................ Newsprint paper................................................ p Preliminary 51 79 r Revised C o m m o d ity Prices Following an abrupt decline during the latter part of July, the prices of actively traded farm products fluctu ated irregularly during August, but on the whole showed a moderate net decrease for the month. The cash price of Number 1 Northern wheat at Minneapolis dropped 7 % cents to 86*4 cents a bushel, as compared with a July high of $1.22%, and spot cotton receded 55 points to 9.45 cents a pound, reaching a level 2.30 cents below its high of July 18. Moderate decreases occurred also in the prices of livestock and hides. While the quota tions for those farm products which have been especially sensitive to speculative influences were substantially below the levels prevailing at the middle of July, prices 70 MONTHLY REVIEW, SEPTEMBER 1, 1933 of agricultural products as a whole showed only a moder ate decline from July 15 to August 15. Farm prices at the farm, as measured by the index of the Depart ment of Agriculture, receded 5 per cent during this period, following an advance of 55 per cent in the pre vious five months. Among the various component groups of the index, pronounced declines occurred only in the grain and cotton classifications, while fruits and vege tables showed a large advance, and miscellaneous farm products rose moderately. Basic commodities other than domestic agricultural products showed little or no net change during August. Commodities for which the changes in quotations were small included the nonferrous metals, steel scrap, rubber, silk, and sugar. In general, the prices of manufactured goods were stable or showed a continued upward tendency in August. The prices of textile products advanced con siderably further accompanying increased manufactur ing costs, and building material prices also showed a moderate advance. F oreign T ra d e The value of this country’s foreign merchandise trade in July showed a substantial increase over the previous month, contrary to the usual movement during the sum mer. After allowance for the usual seasonal variations, both exports and imports were about 25 per cent above June in value, due to increases both in commodity prices and in the volume of shipments. Compared with a year ago, exports which amounted to $145,000,000 were 36 per cent larger, and imports which totaled $143,000,000 were 80 per cent larger. The quantities of several of the leading export and import commodities in the foreign trade of the United States which were shipped or received during the first seven months of this year are shown in the accompany ing diagram in comparison with the movements of these commodities during 1932 and 1931. All four of the im port commodities shown in the diagram were received in larger volume in July than a year ago, the increases ranging from 29 per cent in the case of coffee to 65 per cent in the case of sugar. Receipts of crude rubber and raw silk also were above those for two years ago as well, imports of rubber showing a sudden expansion from June to July, while silk imports have increased continuously and substantially since February. In the case of the important export commodities shown in the diagram July shipments of three of the four com modities or groups were considerably larger than a year ago. An exception was the export of wheat and wheat flour, which has declined and has been reduced in im portance from 7.5 per cent of the value of all exports in 1921-1925 to about 1 per cent currently. Automobile exports were nearly double the small number of a year ago, while shipments abroad of raw cotton, which have been expanding against the usual seasonal tendency since April, showed an increase over last year of more than 50 per cent, and shipments of refined petroleum products showed a rise of almost 40 per cent. E m p lo y m e n t and P ayrolls A large increase in employment and payrolls in the United States was reported for the period from the mid dle of June to the middle of July. According to the seasonally adjusted index of the Federal Reserve Board, working forces at factories showed a rise of 8 per cent, and payrolls advanced 12 per cent after seasonal allow ance. Considerable increases occurred in nearly all of the principal manufacturing lines. Working forces and wage payments were larger also in railroad transporta tion, mining, and wholesale trade, but the number of workers engaged in building construction showed little change, and employment in retail establishments receded seasonally. The number of workers returned to employment from March to July is estimated at about 2,000,000. About half of this increase represented a rise in factory work ing forces, and the balance occurred in other activities, including agriculture, trade, railroad transportation, and construction. A sharp reversal of the downward tendency of factory EXPORTS J F M A M J J A . S O N D J F M A M J J A 5 O N D J F M A M J J A S O N D J F M A M J J A S O N D Quantities of Important Commodities in Export and Import Trade of the United States, 1933 Compared with Previous Two Years FEDERAL RESERVE AGENT AT NEW Y O R K TH O U SAN D S OF EMPLOYEES 2 5 0 , ----------------- 200 WAGE RATE -I N C R E A S E S - 150 100 50 0 tljttr T1 p ir n 50 100 150 WAGE RATE - DECREASE S - 200 250 J ___ I___L J ___I___L J ___ I___ L 1929 1930 1931 N u m ber of F a ctory E m p loyees A ffected by and D ecreases (D a ta collected b y B ureau from reporting establishm en ts in the J ___ I____L_ 1932 1933 W a g e R ate Increases of Labor S tatistics U nited S ta te s ) wage rates during June and July is indicated by data collected from reporting establishments by the Bureau of Labor Statistics, which are shown in the accompany ing diagram. In the month ended June 15 wage rate increases were granted to 213,000 workers, or 7.6 per cent of the employees covered by reports to the Bureau of Labor Statistics, and 202,000 workers received in creases in the following month. Wage rate increases had been negligible since early in 1930, and reductions had been especially numerous since the last quarter of 1931. The recent increases have affected about the same num ber of employees as did wage cuts in the month of most widespread reduction in 1932. In New York State, factory employment increased 5 per cent from June to July, although the usual seasonal movement is downward. After allowance for seasonal changes, employment rose 20 per cent from March to July, reaching a level 19 per cent above that of July 1932. Payrolls showed an unseasonal increase of 6 per cent in July, and after seasonal adjustment were 32 per cent higher than in March, and 22 per cent above the corresponding period a year ago. B u ilding Following increases in the two previous months, this bank’s index of building contracts which is adjusted for seasonal variations and long term growth, receded somewhat during July. Contracts for public works and utilities and other non-residential building showed more than seasonal declines, and total contracts for July were 19 per cent below the June total according to the F. W . Dodge Corporation report. Residential contracts, how ever, showed little change after seasonal adjustment, and continued above the level of a year ago for the third consecutive month. The increase over a year ago of 20 per cent in residential building in July compares with a decline of 67 per cent in public works and utility contracts. There was also a decline of 18 per cent in other non-residential construction, wThich was due entirely to a shrinkage in contracts for buildings of a public or semi-public character. Contracts for factory construction and some types of commercial buildings, 71 such as warehouses, showed a considerable increase over last year. During the first three weeks of August, the average daily amount of building and engineering contracts awarded showed a sizable increase over the July level, in contrast to a usual seasonal decline. The increase was entirely in public works and utility projects, which for this period considerably exceeded those for the whole month of July. Total contracts as a consequence were only 21 per cent below a year ago, a much more favor able comparison than in preceding months. Residential building continued to be the only class to show an increase over last year, but the decline in public works and utilities was reduced to about 20 per cent. For the first seven months of 1933, the total value of building and engineering contracts was 35 per cent below a year ago. Residential building was 25 per cent smaller, public works and utility contracts nearly 50 per cent smaller, and other non-residential building 28 per cent less than in the corresponding months of 1932. A few types of industrial construction, including chemi cal, food and beverage, and petroleum plants, showed substantial increases over last year, but there were large declines in contracts for schools, churches, hospitals and other institutions, public buildings, and highways— all of which are dependent largely for their financing upon governmental organizations or upon public contribu tions. Private construction also has undoubtedly been retarded by financing difficulties due to the unavail ability of mortgage money and the virtual cessation of new security flotations. Crops According to the August 1 report of the Department of Agriculture, weather conditions during the current season were more adverse to the production of crops than in any corresponding period of the past fifty years. For several crops the estimated condition on August 1 was the lowest on record, and in the case of a number of others the condition was unusually poor. In addition, acreage under cultivation was somewhat smaller than the acreage harvested last year; this reduction also was prin cipally the result of unfavorable weather conditions. The following diagram shows the estimated pro duction of ten leading crops as percentages of the aver age harvests for the period 1926-1930. As this indicates, the largest decline has occurred in grains other than corn. The estimated 1933 harvest of all types of wheat, at 500,000,000 bushels, is 42 per cent below the average harvest of 1926-1930, and is the smallest since 1893. The prospects for oats, rye, and barley are no more favorable than those for wheat. On the other hand, the indicated corn output, at 2,300,000,000 bushels, is only 10 per cent below the five year average harvest, although it is 600,000,000 bushels or 21 per cent less than last year’s un usually large crop. The indicated yield of potatoes is 17 per cent smaller than last year’s harvest, which was about equal to the average crop of 1926-1930. The esti mated production of tobacco, although somewhat below the five year average, is considerably larger than last year’s output, reflecting an increase of 22 per cent in acreage planted to tobacco. The estimated production of 72 MONTHLY REVIEW, SEPTEMBER 1, 1933 1926-30 AVERAGE = 100 PER CENT TO B A CC O CORN HAY ( t a m e ) Department store stocks of merchandise on hand, at retail valuation, were only 4 per cent below last year, the smallest decline in 3 years, and apparel store stocks showed a somewhat smaller decline than in recent months. Department stores in practically all localities and also apparel stores reported better collections on charge accounts than a year ago for the third consecutive month. APPLES Percentage change from a year ago COTTON POTATOES Locality BARLEY W HEAT OATS R YE A u g u s t 1 9 3 3 Production E stim a tes o f D epartm en t o f A g ricu ltu re for Ten Principal Crops Com pared w ith A v era g e H a rv e sts o f 1 9 2 6 to 1 9 3 0 apples is also somewhat less than the five year average, but is larger than last year 's harvest. As a result of the expected removal of 10,300,000 acres from cultivation through the acreage reduction program of the Agricultural Adjustment Administration, this year's indicated cotton crop has been reduced to 12,300,000 bales, which is 700,000 bales below last year's rather small crop and the smallest production since 1923. The acreage reduction amounts to about one-fourth of the area in cultivation on July 1, and leaves an indicated area for harvest of 29,700,000 acres. This figure is two-thirds of the average acreage harvested in 1926-1930, and is the smallest since 1907. In contrast to almost all of the other principal crops, the condition of this year's cotton crop is exceptionally high, and it is estimated that the har vest, had there been no reduction program, would have been the third largest on record. D e p a rtm e n t Store T rad e Total July sales of the reporting department stores in this district were 2 per cent below a year ago, the smallest decline in average daily sales since March 1931. The daily rate of sales of department stores in Buffalo, Southern New York State, and the Capital district, showed the largest increases over the previous year in about 3 years, and sales of New York City stores were reduced by the smallest percentage since March 1931. Sales of the Bridgeport department stores were about the same this year as last year, following a moderate decline in June, and the Newark, Rochester, and Syra cuse stores reported approximately the same percentage changes in July as in June. Sales of the leading apparel stores in this district, moreover, were ahead of a year ago by about the same amount as in June when the first appreciable increase in more than three years occurred. In the first half of August, department store sales in the Metropolitan area of New York were 3 per cent larger than the corresponding period a year ago, and average daily sales showed the first increase since May 1930. Net sales Stock on hand end of month Per cent of accounts outstanding June 30 collected in July 1932 1933 New Y o r k ........................................................... Buffalo.................................................................. Rochester............................................................ Syracuse.............................................................. N ew ark................................................................ B ridgeport.......................................................... Elsewhere............................................................ Northern New Y ork S tate.......................... Southern New York S ta te.......................... Hudson River Valley D istrict................... Capital district.............................................. — 1.7 + 6 .3 — 10.2 + 3.1 — 6 .9 + 0 .3 + 1.3 — 5 .5 + 4 .7 — 0 .6 + 4 .7 — 0 .4 — 20.5 — 10.8 — 2 1.7 — 3 .7 — 3 .3 — 11.3 4 0.8 37.8 39 .5 35.8 3 5.4 3 1.8 4 5.4 4 0.7 39 .2 24.7 38.4 39.0 2 9.6 All department stores.............................. — 2.0 — 3 .9 3 7.8 4 1.3 Apparel stores............................................ + 2.2 — 17.5 38.1 4 2.3 22 .0 W h o lesale T ra d e July sales of the reporting wholesale firms in this dis trict averaged 81 per cent higher than a year ago, by far the largest increase ever recorded in reports to this bank. All lines of wholesale trade showed increases over last year, and in the hardware, grocery, shoe, cotton goods, silk, men's clothing, jewelry, and diamond trades the increases were of record proportions. Sales of the paper concerns and orders for machine tools were above those of a year previous by the largest percentages since the fall of 1928, and sales of the stationery firms showed the largest advance since December 1929. The reporting grocery and hardware firms had larger stocks on hand at the end of July than a year ago, but other lines continued to report smaller inventories than last year. July collections of accounts outstanding again averaged higher than last year. Com m odity Percentage change July 1933 compared with June 1933 N et sales M en’s clothing............... Cotton go o d s.................. Machine tools**............ Paper................................ Weighted average. . . — 1.5 — 26.2 + 2 2 .4 — 2 .4 * - f 7 .2 + 5 .9 — 18.5 + 3 5 .4 + 2 .3 — 7 .4 — 3 .9 — 24.7 — 4 .0 Stock end of month Percentage change July 1933 compared with July 1932 Net sales + 10.8 + 3 1 .0 + 1 5 6 .4 + 2 2 '.3 + 1 2 8 .0 — 8 . 1 * + 9 0 .0 * + 9 0 .4 + 0.6 + 5.1 + 1 8 .7 + 2 3 .6 + 1 1 3 .0 + 9 .0 + 1 7 .9 — 18.6 + 2 3 5 .2 — 7 .7 + 1 3 2 .9 + 8 0 .9 Stock end of month Per cent of accounts outstanding June 30 collected in July 1932 1933 — 8 ’.3 — 34.0* 73.8 27.2 29.7 61.3 84.4 30.2 30.1 64.8 — i o .7 + 9 .2 2 i ’.4 4 4 .0 2 0 ‘.3 48.1 3 9.4 — 38.6 — 4 4.4 5 i ‘.9 39.9 J 16.4 } 21 .0 4 7.0 51.1 + 3 9 .4 * Quantity not value. Reported by Silk Association of America ** Reported by the National Machine Tool Builders Association 4 0.7 FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, SEPTEMBER 1, 1933 Business Conditions in the United States (Summarized by the Federal Eeserve Board) I ND USTRIAL production increased further from June to July, contrary to seasonal tendency, and in recent weeks has continued at a relatively high level. Since the middle o f July there have been reductions in wholesale prices o f leading raw materials while prices o f many other products have advanced. Index N um ber o f Production o f M an u factu res and M inerals Com bined, A d ju sted for Seasonal V ariation ( 1 9 2 3 - 2 5 average = 1 0 0 per cen t) Index N u m bers o f F a ctory E m p lo ym en t and P a yrolls, W ith o u t A d ju s tm e n t for Seasonal V ariation ( 1 9 2 3 -2 5 a v e r a g e = 1 0 0 per cen t) P roduction and E mployment Volume o f industrial output, as measured by the Board fs seasonally adjusted index, advanced from 91 per cent o f the 1923-1925 average in June to 98 per cent in July, which compares with 60 per cent in March. The prin cipal increase in July was at steel plants where activity advanced from 46 per cent o f capacity to 59 per cent. Production in the lumber and coal industries was also in larger volume and daily average output o f automobiles showed none o f the usual seasonal decline. Output at shoe factories and woolen mills con tinued at an unusually high rate while consumption of cotton by domestic mills decreased somewhat. Cigarette production declined sharply from the high level o f May and June. Since the middle o f July a decrease has been reported in the output o f steel. Working forces and payrolls at factories increased considerably between the middle of June and the middle o f July. As in other recent months the largest increases were generally at establishments fabricating raw materials into semi-finished products. Value o f construction contracts awarded, as reported by the F. W. Dodge Corporation, showed a decline in July followed by an increase in the first half o f August. Total awards during the six weeks were in about the same volume as in the preceding six weeks and in larger volume than in earlier periods this year. Department o f Agriculture estimates as o f August 1 indicate harvests generally smaller than a year ago. The cotton crop is forecast at 12,314,000 bales, a reduction o f 700,000 bales from last season, reflecting curtailment in acreage as a part o f the program o f the Agricultural Adjustment Administra tion, offset in large part by an unusually high yield per acre. The wheat crop is estimated at 500,000,000 bushels, a reduction o f 225,000,000 bushels from last year’ s small harvest, and feed crops are expected to be unusually small. D istribution Freight traffic increased further from June to July by a substantial amount, but in recent weeks shipments, particularly of miscellaneous freight and grains, have been somewhat smaller. Department store sales declined in July by about the usual seasonal amount; they were larger than a year ago, however, and trade reports for the first half o f August indicate an increase in sales. W holesale P rices Wholesale prices o f commodities increased further during the first three weeks o f July and, according to the index o f the Bureau of Labor Statistics, there has been little change in their general level since that time. Prices of grains, cotton, and many imported raw materials, however, were considerably lower in the third week o f August than in the middle o f July while prices o f textiles were higher, reflecting in part the application o f the processing tax on cotton. Prices o f leather and coal also advanced during this period. Index N u m bers of B uilding C ontracts B ased on T h ree M onth M o v in g A v e r a g e s o f F . W . D odge Corporation D ata for 3 7 S tates, A d ju sted for Seasonal V ariation ( 1 9 2 3 - 2 5 average = 10 0 per cen t) W e d n e sd a y F igu res fo r R eporting M em ber B anks in 9 0 Cities (L a te s t figures are for A u gu st 16) F oreign E xchange In the exchange market the value o f the dollar in terms o f the French franc advanced from a low o f 69 per cent o f its gold parity on July 18 to 75 per cent at the beginning of August and since that time has fluctuated between 73 and 75 per cent. B ank Credit Net demand deposits o f weekly reporting member banks in 90 cities declined between the middle o f July and the middle of August, owing in large part to further withdrawals of bankers’ balances from banks in New York City and elsewhere. The banks ’ loans decreased by $71,000,000 during the period, reflecting chiefly a reduction in loans to brokers and dealers in securities. Their holdings o f United States Government securities, after declining between July 19 and August 9, increased during tlie week ended August 16 in connec tion with Treasury financing at that time. Total reserves o f all member banks increased by $81,000,000 during the four week period ended August 16, reflecting chiefly the purchase o f $42,000,000 o f United States Government securities by the Reserve Banks and a return o f $23,000,000 of currency from circulation. The growth in member bank reserves, occurring at a time when reserve requirements were being reduced in consequence of a decline in their deposits, brought their excess reserves to a level above $550,000,000. Money rates in the open market generally continued at low levels.