Full text of Economic Policy Review (Federal Reserve Bank of New York) : September 1, 1935

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MONTHLY REVIEW
Federal Reserve Agent

F e d e r a l

R e s e r v e

D is t r ic t

Federal Reserve Bank, New York

M o n e y M a r k e t in A u g u s t
Despite a considerable increase in the volume o f secur
ity trading during recent weeks, a rise in stock prices
during the early part of August to the highest levels in a
number of months, and a rapid expansion fo r several
months in new security flotations, there has been no
corresponding increase in the demand fo r credit in the
New Y ork money market. Loans to security brokers and
dealers in New Y ork City, after a moderate increase from
February to May, have since shown no net increase, and
other security loans of weekly reporting member banks
have continued to decline; so that the total volume o f
security loans of the reporting banks during August has
been the smallest in a number of years.
The accompanying diagram compares the course o f
security loans in the reporting member banks with that
o f security prices since the beginning of 1932. A s this
diagram indicates, there has been no sustained increase
in the volume o f security loans accom panying or follow
ing periods of rising security prices during the past
three years, and the present volume o f security loans in
the reporting banks is approximately 40 per cent lower
than at the beginning of 1932.
The divergence between security prices and security
loans has occurred at a time when the volume o f funds
available fo r investment has been increasing steadily.
Net demand deposits o f weekly reporting member banks
in New Y ork City rose to a new high level in August,
and on A ugust 2 1 were approximately $1,600,000,000
larger than a year previous, an increase of about 25 per
cent. In reporting banks in other cities throughout the
country net demand deposits rose close to the previous
high point of July 17, and also showed an increase o f
more than 20 per cent over a year previous, and data
from the June 29 condition reports, recently issued by
the Federal Reserve Board, indicate an increase o f simi
lar amount in the deposits of 44cou n try” member banks
during the past year. In New Y ork and other principal
cities a part of the increase in net demand deposits has
represented the further accumulation in balances main
tained with city banks o f the idle funds of correspondent
banks throughout the country, but a large part o f the
increase has been in other types o f deposits.
Notwithstanding the increase in reserve requirements
that has accompanied the further rise in deposits, excess
reserves o f member banks rose to a new high level in
August. In New Y ork City excess reserves rose at one
time late in the month to around $1,300,000,000, and for

C o n d itio n s

September 1, 1935

all member banks throughout the country excess reserves
rose to nearly $2,800,000,000 in the last week o f August.
These amounts indicate member bank reserves more
than double legal reserve requirements. The further
increase in bank reserves during A ugust was due partly
to continued gold imports early in the month, but
more largely to Government disbursements o f balances
previously accumulated in the Reserve Banks and of
free gold on hand in the Treasury.
The activity o f demand deposits, as reflected in bank
debits, has increased somewhat from the very low levels
prevailing up to the middle of this year, apparently due
partly to the increased activity in the security markets.
There has been no indication recently, however, o f more
rapid expansion o f credit based on idle bank reserves.
The total loans and investments of weekly reporting
banks, which had increased in the first three weeks o f
July as the result o f substantial purchases o f new Gov
ernment securities, showed some net reduction in the fou r
weeks ended A ugust 2 1 , due to the distribution during
the latter part o f July and early August of part of the
Government security holdings previously acquired and
to the redemption o f called Consols and Panama Canal
bonds. Security loans, as previously noted, remained at
low levels, and other loans, after reaching the low point
LO ANS
B IL L IO N S O F D O L L A R S

S E C U R IT Y
P R IC E IN D E X

120

BOND

’ Ntsecurity
^yLOANS
^

YT
\

ll
I *

f t\

S e c o n d

B u s in e s s

o f C r e d it a n d

100

X s
ir
t
t
\ |/STOCK PRICES
\N

i i i l
1932

_ j

i
1933

. 1... 1. . 1, , ....I. . 1
1934

1935

Movement o f Total Security Loans of Reporting Member Banks,
Compared with Movements of Stock and Bond Prices (Standard
Statistics Company weekly indexes of stocks and bonds)

MONTHLY REVIEW, SEPTEMBER 1, 1935

for the year at the end o f July, subsequently showed
only a moderate increase, presumably seasonal in char
acter. Increases occurred also in holdings o f Govern
ment guaranteed securities and of other investment
securities.

per

CENT

M oney R ates

The principal change in money rates during August
was an upturn in yields on Government securities fo l
lowing an almost uninterrupted decline fo r a number of
months previous.
M oney Rates at New York
Aug. 31, 1934 July 30, 1935 Aug. 30, 1935
Stock Exchange call loans.......................
Stock Exchange 90 day loans.................
Prime commercial paper— 4 to 6 months
Bills— 90 day unindorsed.........................
Customers’ rate on commercial loans
(Average rate of leading banks at
middle of m onth)..................................
Treasury securities:
Maturing December (yield)................
Maturing February 1937 (yield) . . . .
Average yield on Treasury notes (1-5
years)........................................................
Average yield on Treasury bonds (more
than 5 years to earliest call date) . . . .
Average rate on latest Treasury bill
sales:
133 day issue......................................
273 day issue......................................
Federal Reserve Bank of New Y ork re
discount ra te..........................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed bills. .
*Nominal.

t Average

*X-l
K-1

X -X

H
*K

2.25

1.71

1.75

N o yield

N o yield
0 .09

N o yield
0 .1 7

1.31

0 .5 6

JO. 78

2.95

2.42

2.56

0 .0 7
0 .07

0 .i 3

raised 0.05 by exclusion of issue maturing August 1,1936

G overnment S ecurities

The increase in yields on Government securities re
flected the first material reversal of Government security
prices in almost a year, and, as the diagram shows,
accompanied a somewhat corresponding rise in yields on
high grade corporation securities. The decline in prices
of Government and other high grade bonds follow ed suc
cessive offerings o f new securities in substantial volume.
In the case o f long term Treasury bonds, no material
decline in prices occurred until the second week of
August, but by the 27th of the month the average price
had declined a total o f about 1 % points, and the average
yield on all issues not due or callable within 5 years had
risen to 2.62 per cent, the highest yield since February.
Prices of short term Government securities also showed
some decline in August, and the average yield on out
standing Treasury notes of 1 to 5 year maturity rose
as high as 0.88 per cent, an advance o f more than %
per cent over the end o f July. In the closing days of
the month, however, the market fo r Government securi
ties became somewhat firmer.
New financing by the Treasury in A ugust included the
sale of two more $ 1 0 0 ,000,000 blocks of 2 % per cent
Treasury bonds o f 1955-60. On the first o f these the
average price realized was 1 01 18 /3 2 and the average
yield to the earliest call date was 2.77 per cent, or vir
tually the same as on the previous issue of these bonds,
but on the second of the August sales the average price
declined to 100 25/32 and the yield rose correspondingly
to 2.82 per cent. W eekly sales of Treasury bills during
August aggregated $200,000,000, com prising four
$50,000,000 issues of 273 day bills. On the first three of
these issues the average rate was 0.07 to 0.08 per cent,
but on the issue dated August 28 the rate rose to 0.13

Average Yields on United States Treasury and High Grade Corpora
tion Bonds (M oody’ s Investors Service data for Aaa bonds;
Federal Reserve Bank of New Y ork data for average yield on
all Treasury bonds not due or callable within 5 years)

per cent.
These bill issues replaced in part weekly
maturities o f 182 day bills aggregating $275,000,000. In
addition, toward the end of the month, the Secretary o f
the Treasury offered, on behalf o f the Federal Farm
Mortgage Corporation, $100,000,000 or thereabouts o f
i y 2 per cent 4 year bonds of the Corporation, the bonds
to be sold to the highest bidders with paym ent on Sep
tember 3, 1935. These bonds are to be fu lly guaranteed
by the United States. Tenders received amounted to
$85,592,000, o f which $85,262,000 were accepted at an
average price of approximately 99, giving an average
yield o f about 1.76 per cent.
B i l l s and Commercial Paper

Continued dulness characterized the market fo r bank
ers acceptances during August. Sales of bills by dealers
were confined fo r the most part to a small group o f the
larger banks. The rate in almost all cases was y% per
cent, as only a few scattered transactions involved bills
o f longer than 90 day maturity. The volume o f bills
outstanding at the end o f July amounted to $321,000,000,
a decline o f $ 2 2 ,000,000 during the month, due chiefly to
a $ 1 0 ,000,000 reduction in domestic warehouse credits
and a $7,500,000 drop in export bills, the two classi
fications which have been the principal factors in the
downward movement o f the past 8 months. A ccepting
banks’ holdings o f bills were reduced during J uly by
about the same amount as total bills outstanding, and
continued to represent more than 90 per cent o f the total.
A ugust drawings of commercial paper by commercial
and industrial concerns were reported to have been in
somewhat larger volume than in July, but supplies in
general continued to be considerably smaller than the
amount fo r which bank investment inquiry was made.
The rate fo r prime paper remained at % per cent.
A t the end o f July commercial paper houses had
$163,600,000 o f paper outstanding, as against $159,300,000 at the end o f June. The amount outstanding,
however, was about 3 per cent below the level o f a year
ago in July, the first time since A ugust 1933 that the
volume has been less than a year previous.

FEDERAL RESERVE AGENT AT NEW YORK
S e c u r ity M a r k e ts

Stock prices advanced further during the first two and
one-half weeks of August and there was a sizable in
crease in the activity o f the market, the turnover on the
New Y ork Exchange on a number of days approaching
or exceeding 2 million shares. Industrial and railroad
shares rose 4 to 5 per cent during this period while pub
lic utility stocks advanced about 18 per cent, and the
advance in prices since March was extended to about
38 per cent in the case of the industrials and railroads
and to over 10 0 per cent in the case of the public utili
ties. A t the levels then reached industrials were the
highest since 1931. The other two m ajor groups, while
the highest in some months, did not rise above levels
reached in 1934. In the second half o f August, however,
prices o f all these groups o f stocks turned downward,
especially the public utilities, and toward the close o f the
month prices were little different than at the opening of
the month. Bank stocks follow ed a somewhat similar
course; around the middle o f the month the average
price o f leading New Y ork City bank stocks reached the
highest point since June 1933, some 27 per cent above
the quotations prevailing at the opening of July, but in
the second half of A ugust prices moved irregularly lower.
The decline in prices of high grade corporation bonds,
indicated by the diagram showing yields on Government
and corporate bonds, amounted to about 1% points in
August, which together with the preceding decline in
July makes a total decrease of about 2% points from the
ye a r’s high reached early in July. Somewhat less high
grade bonds were little changed on the average during
August, while medium and lower grade issues advanced
during the period when stock prices were rising, but
subsequently declined slightly. A s the net result o f the
diverse movements during August, corporation bond
prices in general showed little change from quotations at
the end o f July.
N e w F in a n c in g
A marked decline in the volume of public offerings of
new securities occurred during August, follow ing the
rather large volume o f security issues which reached the
market during the preceding fou r months. The curtail
ment o f new issues may be attributable in part to the
fact that quotations of some o f the corporation bonds
floated in recent months have declined below the issue
prices, perhaps due partly to the rapid rate of emission
as well as the very close adjustment o f coupon rates and
prices o f new issues to market quotations for old seasoned
issues, and partly to the moderate reaction in the general
market fo r high grade issues during the past month.
The total fo r domestic corporate security financing
dropped to less than $150,000,000 in August, as com
pared with more than $500,000,000 in July, but com
pared favorably with the amounts offered during the
previous four months and of course was still in marked
contrast with the almost complete absence of corporate
issues in the previous two years, Railroad financing was
represented in larger volume than in some time by the
offering of $50,000,000 Pennsylvania Company 4 per
cent 28 year secured bonds at par, the proceeds o f which
will be used to retire in November 4 % per cent bonds

due in 1963. In addition, $15,282,000 of equipment trust
certificates o f the Pennsylvania Railroad Company were
floated during the month. A m ong other corporate offer
ings the largest was $25,000,000 of Cudahy Packing
Company issues, yielding 3.75 to 4.00 per cent, which
were largely fo r refunding purposes.
The largest single issue o f the month was in the fo r
eign field, namely $76,000,000 o f Dom inion o f Canada
2 % per cent bonds due in 1945, which were sold at a
price o f 97% . The proceeds from the sale o f these bonds
will be used to pay off $50,000,000 o f 2 per cent notes
m aturing September 1, 1935, which were acquired by
American banks at a time when unfavorable conditions
made impracticable the refunding o f a maturing issue in
the market, and also to redeem $26,000,000 o f 4 % per
cent Canadian National Railway Company bonds called
for paym ent September 15, 1935.
In domestic State and m unicipal financing, the ab
sence o f any large issue o f securities made the A ugust
total the smallest in some months.
B u s in e s s P r o fit s
F o r the A p ril to June quarter of this year, aggregate
net profits of 269 industrial and mercantile concerns
whose reports have become available were approxim ately
1 0 per cent larger than the earnings during the corre
sponding period o f 1934. The outstanding percentage
increases in profits— those in excess o f 40 per cent— were
reported by the motion picture and amusement, oil, auto
mobile, automobile accessory, and electrical equipment
groups. There were two groups, however — railroad
equipment and shipping— which reported combined
deficits fo r this period, whereas last year there were no
groups showing deficits. The combined profits o f all
groups exceeded those o f previous years through 1931,
but several groups failed to reach the 1931 level o f earn
ings ; the largest declines in earnings compared with that
year occurred in the chemical and drug, and food and
food products groups, both o f which showed smaller
profits in 1935 than in the 1934 quarter.
Profits o f the 388 industrial companies that have issued
reports on their earnings fo r the first half year totaled
15 per cent more than a year ago, and 22 per cent more
than in 1931, but were materially less than in 1930 and
only about one-half as large as in the preceding period
o f active business. The improvement was by no means
uniform , nine o f the twenty-five reporting groups show
ing smaller earnings this year than last. The number of
companies whose operations continued to result in
deficits— 2 2 per cent o f the total— was the same as last
year although the concerns were not the same in all cases.
A pproxim ately 55 per cent of the companies reported
im proved earnings between 1934 and 1935, either in
creasing profits, reducing deficits, or showing some profit
this year instead o f continuing last y e a r’s losses.
The Class I railroads as a group had a deficit in the
first half o f 1935, nearly three times as large as in 1934,
and about one-half as large as in 1932, which was the low
point o f railroad earnings. Total operating revenues of
the railroads were slightly larger than last year but
operating expenses were increased, due partly to the
restoration o f previous wage cuts on A p ril 1 , with the

MONTHLY REVIEW, SEPTEMBER 1, 1935

result that the deficit after paym ent of bond interest
and other fixed charges was increased.
Net income of public utility companies other than tele
phone companies during the first half year again was
slightly smaller than in the previous year, although a
slight upturn occurred during the second quarter. A s
compared with 1931, net income this year was about 31
per cent smaller, despite a substantial growth in the use
of facilities. F or telephone companies, only figures fo r
net operating income, that is, before payment o f bond
interest, are available; these show a decline o f about 3
per cent between 1934 and 1935, follow ing an increase
of 14 per cent between 1933 and 1934.

Closing Cable Rates at New York

(Net profits in millions of dollars)
Second Quarter
Corporation group

1931

1933

61.1
4 7 .7
Automobiles................
Automobile parts and
accessories
(excl.
tires)................. ..
8 .5
5 .9
1 .1
A viation....................... — 0 .7
Building supplies . . . .
1.9 — 1 . 2
27.3
17.3
Chemicals and drugs.
Clothing and textiles.
0 .1
0 .8
0
Coal and coke.............
— 1.4
11 .6
Electrical equipm ent.
0 .4
Food and food prod
35.6
2 8.7
ucts...........................
Household equipment
3 .1
2 .7
Leather and shoes . , .
1 .5 — 0 .9
Machinery and tools.
Metals and mining
(excl. coal and coke)
4 .4
4 .8
M otion pictures and
amusement.............. — 2 .4 — 2 . 0
Office equipment . . . .
2 .7
1 .5
Oil.................................. — 26.9 — 7 .8
Paper and paper prod
ucts...........................
1 .1
0 .4
Printing and publish
ing.............................
3 .8
0 .4
Railroad equipment. .
2 .9 — 1 . 6
Rubber and tires . . . .
Shipping.......................
0 .9
0 .4
8 . 2 — 14.3
Steel..............................
Stores............................
T ob a cco........................
1.4
0 .6
Miscellaneous..............
7 .0
5 .8
™ +-1 / 269 cos. 2nd quar.
1 otal j 3 88 cos_ lst half.

153.1

149 Class I Railroads
Net incom e..............

Telephone com
panies, net operating
incom e......................

89.3

1934
4 1.3

61.1

9 .9

14.2

0 .2
0 .8

4 5.5

1934

3 1.8
0 .5
3 .9
50.0
1 .3

2 0 .8
2 .6

5 6.7

31.1

— 1.4
0
1.6
0 .2
0 .6 — 2 .4
10.5
19.9 — 2 . 1

50.8
2 .0
2 .2

1.2

10.4

19.1

9 1.2
6 1.7
2 1.5
10 .0
5 .4
5 .6
4 .4 — 6 .7

65.9
16.1
7.1
4 .1

51.9
15.7
5 .5
6 .9

10.7

6 .1

26.1

2 6.3

2 .4 — 0 . 1 — 4 .5
3 .6
5 .2
1.6
19.1 — 38.9 — 32.3

3 .4
7.1
24.9

5 .1
7 .3
32.1

0 .5

1 .4

1 .8

3 .1

3 .8

10 .2

10 .6

0 .8

2 .2

2 .4
2 .5
1.5 — 0 .3

2 .3
11.3
5 .9
6 .9
7 .5 — 3 .9
1 .6
0 .9
— 0 .9 — 3 .3
4 .1
4 .6
0 . 2 — 0 .5 — 0 .9
— 0 .2
0
0 .3
20.4
17.1 — 50.9
14.7
10 .0
19.0
4 .9
15.6
16.5
10 .1
0 .5
1.3
2 .9
1 .7
0 .8
1 .3
6 .4
8 .3
13.9
24.3
29.9
2 2 .6
177.5

196.0

— 6 .3 — 7 .9 — 18.4

357.8
*

7 7.0

380.7

437.6

- 1 0 1 .2 — 2 3.2 — 6 2.0

66 Other public utilities

Net incom e..............

— Deficit.

*
85.6

*
62.7

4 9.4

4 8.3

8 5.3

96.9

9 3 .7

5 7.8

5 9.2

179.7

131.2

125.5

124.9

*N ot available.

F o r e ig n E x c h a n g e s
The rates fo r the principal European currencies
showed considerable stability during August.
The
French, Dutch, and Swiss exchanges moved within a
narrow range, remaining continuously above their lower
gold points. The guilder, which ruled weakest among
the gold bloc exchanges, showed a moderate reaction
in the first ten days of A ugust follow ing its sharp
recovery at the end o f July. A ll o f the European
gold currencies were rather firm around the middle of
the month. Owing to large arrivals of gold in London
from India and to the cessation of purchases fo r account
o f private hoarders, the premium on gold in the London
bullion market relative to the quotations fo r the E uro
pean gold exchanges nearly disappeared during August,
and fo r the first time in several months moderate pur

Aug. 31, 1934 July 31, 1935 Aug. 29, 1935
$ .2381
.2230
4.9900
.06695
.3990
.6875
.0870
.2510
. 1388
.2575
.3314

1935.

15.1
0 .6
19.5
— 1.6
1 . 2 — 0 .3
0
1.0
6 . 1 — 4 .0
2 .7

2 7.2
3 .1

0 .7

8 9.7

1933

9 9.0

2 4.2

1.0

1931

69.9

2 4.7
0 .3
0 .5
7 .3

3 .5
11.7

Exchange on

First six months
1935

chases o f gold were reported to have been made in
London fo r shipment to France.
The pound sterling continued to show an upw ard
tendency during the past month, rising from $4.95% on
July 31 to a high o f $4.98% during the course of trading
on A ugust 14. In the second half o f the month the rate
was quite stable, fluctuating between $4.97 and $4.98% .
In previous months advances in sterling have usually
occurred during periods o f financial and monetary dis
turbance in one or more o f the gold bloc countries, but
in A ugust the firmness o f the pound appeared to be
related to developments in the London silver market
rather than to events in the gold bloc countries.

$ .1692
.2214
4.9563
.06626
.4037
.6802
.0821
.2491
. 1373
.2557
.3275

$ .1686
.2 2 2 0

4.9738
.06618
.4027
.6779
.0820
.2499
.1371
.2564
.3264

1.0206
.3328
.0857
.8000

.9987
.3304
.0857
.8040

.9975
.3316
.0863
.8050

.2987
.3783
.3569

.2923
.3747
.3800

.2944
.3760
.3700

G o ld M o v e m e n t
D uring the first week o f A ugust a total o f $28,800,000
o f gold was received from H olland, as a result o f the
weakening o f Dutch exchange in the latter part of July.
In addition, $5,000,000 o f gold was received during
A ugust from Canada, $4,600,000 from India, and
$870,000 from China.
Supplementing these imports, $1,800,000 o f gold was
released from earmark fo r foreign account at this bank
in August, and there were further deposits of newly
mined domestic gold and scrap gold, fairly substantial
in amount, at the mints and assay offices. Consequently
a total o f approxim ately $55,000,000 was added during
A ugust to the monetary gold stock o f this country.
C en tra l B a n k R a t e C h a n g es
Effective A ugust 3 the discount rate o f the Nether
lands Bank was lowered from 6 to 5 per cent, follow ing
a firming o f guilder exchange and a cessation o f the
gold export movement which in July had led to a rapid
increase in the bank rate from 3 per cent to 6 . A s of
the 9th the Bank o f France rate was reduced further
from 3y2 to 3 per cent. The National Bank o f Bulgaria
lowered its rate on the 15th from 7 to 6 per cent, and
the National Bank o f H ungary reduced its rate from
4 % to 4 per cent effective A ugust 29. On August 1 2
the Bank o f Italy raised its discount rate from 3y2 to
4y2 per cent, and on A ugust 2 2 the discount rate o f the
central bank o f Denmark (National Bank in Copen
hagen) was raised from 2 y 2 to 3y2 per cent.
Inform ation has been received of the follow ing rate
increases at the Central Bank o f Chile, effective June
1 2 : discount rate fo r member banks, from 4 to 4 y2 per
cen t; fo r the public, from 5 % to 6 per cent.

FEDERAL RESERVE AGENT AT NEW YORK
F a rm P r o d u c tio n a n d I n c o m e

The A ugust 1 Government crop report indicated that
acreage to be harvested this year, although larger than
in 1934, would be about 6 per cent below the average fo r
the 10 years previous. However, yields per acre of prin
cipal crops were estimated as nearly 3 per cent above
the average prior to 1934. A s shown in the table below,
production of the leading crops fo r this year was esti
mated to be considerably larger than a year ago, but in
most cases below the average o f 1928-1932. Total wheat
production was estimated at 607,678,000 bushels, reflect
ing a sharp decline during July due to damage to the
spring crop from unusually wet weather and the infesta
tion o f black rust. The corn crop estimate, on the other
hand, was increased about 11 per cent during July to
2,272,147,000 bushels, which is 290,000,000 bushels below
the five year average. Less than average crops were
forecast for tobacco and cotton, although in the case of
the latter the indicated crop is more than 2 ,000,000 bales
larger than the 1934 crop. The hay crop appeared to be
the largest in 6 years and several of the important truck
crops such as apples, potatoes, and beans were also esti
mated to be larger than the 1928-1932 average.
________________August 1 Indicated Production of Principal Crops________________
As percentage of

Yields per acre o f the im portant crops in New Y ork
State have been estimated at about 9 per cent above the
average fo r 1921-1930. Crop prospects in the State im
proved during July, and indicated production o f the
leading crops is not only larger than last year but in
most cases is also larger than the average fo r the years
1928-1932.
Increases over last year in prices o f farm products
and in agricultural production have been reflected in an
B IL L IO N S
OF DOLLARS

1 2 ,-----------------------------------------------------------------------------10

n i
1 1
1929

1930

1931

1932

1 1933
1

i
1934

1935

Estimated Total Cash Income o f Farmers from Agricultural Market
ings and Payments by Agrictultural Adjustm ent Administration
(Department of Agriculture data for all years—
1935 preliminary)

increase in cash income to be received by farmers this
year which has been estimated by the Department of
A griculture at approxim ately $6,700,000,000, as com
pared with $6,387,000,000 in 1934. A s is shown in the
accom panying diagram, this figure, which includes rental
and benefit payments, payments fo r the exercise of
cotton options and fo r the emergency purchases o f live
stock in drought areas by the A gricultural Adjustm ent
Adm inistration, is the largest in five years. In the first
seven months of the current year, farmers ’ receipts from
marketings were about $153,000,000 larger than in the
corresponding period o f 1934, and $127,000,000 more
was received this year than last from the A gricultural
A djustm ent Adm inistration.
C o m m o d i t y P r ic e s
The general level o f wholesale com modity prices
moved higher during the first three weeks o f August,
and although several o f the actively traded commodities
receded somewhat in the remainder o f the month, net
gains predominated fo r the month as a whole. A sub
stantial advance occurred in raw silk prices, the quota
tion reaching $1.80% a pound on August 19, the highest
since October 1933, and after some subsequent decline,
the price closed the month at $1.75% a pound, up 14
cents from the end o f July. Similarly, hog prices reached
a new high fo r several years in the first three weeks of
August, and, although there was some recession in the
latter part o f the month, remained higher than at the
end o f July. Sugar prices advanced sharply after the
im port quota fo r Cuban sugar fo r 1935 was exhausted
on August 19, and the price o f the raw product rose to
3.50 cents a pound, the highest since October 1933. The
spot quotation fo r Number 1 Northern wheat at Minne
apolis advanced during the month to $1.30% a bushel,
the highest since January 1930 but later declined to
$1.28 a bushel thus showing a net gain of 5% cents;
wheat futures, however, moved lower, the December con
tract at Chicago receding 6 % cents to 89 cents a bushel.
The price o f copper was increased % cent on August
19 to 8 % cents a pound, the first change since the price
was reduced from 9 to 8 cents on June 27, follow ing the
abandonment o f the N .R.A. Code. Zinc advanced 20
points to 4.60 cents a pound, the highest since November
1933, and net gains fo r the month were shown also in
prices o f scrap steel, lead, hides, steers, and rayon.
Cotton prices receded moderately during the first three
weeks o f August, and follow ing the first announcement
on A ugust 22 concerning the proposed basis fo r Govern
ment loans on the 1935 crop, prices declined sharply, the
spot quotation decreasing to 10.85 cents a pound. The
second announcement on cotton loans raising the loan
value from 9 to 10 cents and guaranteeing 12 cents to
the farm er was follow ed by a slight firming o f prices,
but subsequently spot cotton declined to a new low since
last March of 10.80 cents, as compared with 12.10 cents
a pound at the end o f July. The price o f silver declined
2 % cents to 65% a fine ounce during August, as com
pared with about 50 cents an ounce a year ago, and with
a high o f 81 cents reached last A pril. Declines fo r the
month occurred also in prices o f corn and tin.
B u ild in g
In the Metropolitan New Y ork and upstate New York
area residential building contracts awarded during July

MONTHLY REVIEW, SEPTEMBER 1, 1935

1cc

D D U C T IC ) N

A vailable data fo r the first half o f August indicate
that the distribution of goods was maintained at least at
the level of the previous month. Advances o f approxi
mately average proportions fo r this time of year occurred
in the railroad movement of merchandise and miscel
laneous freight and in bulk freight shipments, the rise
in bulk loadings being due to substantial increases in
grain, forest products, and livestock shipments. More
than the usual seasonal gain appears to have occurred in
department store sales in the New Y ork Metropolitan
area.
D uring July, little change in the aggregate was evi
dent in this bank’s seasonally adjusted indexes o f gen
eral business activity. Shipments of bulk freight over
the railroads showed a sizable decline as a result of
reduced coal shipments, and mail order house sales and
chain store trade receded by somewhat more than the
usual seasonal proportions. The railroad movement of

A
/ N
/ \

I n d e x e s o f B u s in e s s A c t i v i t y

THO USAND S
OF CARS

held at the level of the previous three months and were
more than double the total for July 1934. Public works
and utility projects increased considerably from June to
July, due to railroad construction, and were in the larg
est volume since last October. Other nonresidential
contracts were little changed between June and July and
were larger than last year. F or the first seven months
of this year, total contracts of $167,000,000 were about
$ 6 ,000,000 larger than in the corresponding period of
1934; residential contracts totaling $64,000,000 were
$25,000,000 larger, but public works and utility projects
amounting to $38,000,000 were $13,000,000 smaller, and
other nonresidential construction work of $65,000,000
was $ 6 ,000,000 less than last year.
F or the 37 States covered by the fu ll F . W . Dodge
Corporation report, residential contracts in July were
about 2 y2 times larger than a year ago, having shown
less than the usual seasonal recession from the previous
month. Public works and utility projects showed a large
unseasonal advance from June to July and were in
larger volume than a year ago fo r the first time since
July 1934, the increase representing heavier highway,
sewerage, water front, and railroad construction. Other
nonresidential contracts were slightly smaller than in
June of this year or July of a year ago. Reflecting the
increase in residential contracts, private construction
work this year was in larger volume than at any time
during the past 3y2 year period for which comparable
data are available, and constituted almost 60 per cent of
all contracts, as against about 50 per cent a year ago.
Total contracts awarded during the first seven months of
1935 amounting to $856,000,000 were $118,000,000
smaller than in the same period o f 1934; residential
construction totaled $257,000,000, an increase of
$105,000,000 over last year, while public wTorks and
utility contracts o f $283,000,000 were $200,000,000 less
than a year ago, and other nonresidential work of
$316,000,000 was $23,000,000 smaller.
Data fo r the first three weeks of August indicate a
more than seasonal falling off in the rate of residential
construction from the com paratively high level of other
recent months, but both public works and other non
residential contracts increased materially during this
period in contrast to usual seasonal declines.

r\
1
J
/
/

\i
V

A
V
\

V
V

ii
11
tj

> •
R E G ! IS T R A T K DIMS
1

1929

' A
17

1A
if \

i k
i l\ J
11
1

t\
L\

l ! \

i hA
11 \
11
\
i/
\
A !/
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v

1
H
r

j
'r
*1

1930

1931

1932

1933

1934

1935

Average Daily Production of Passenger Automobiles and
Registrations of New Cars

merchandise and miscellaneous freight, however, held at
approximately the level prevailing since May, and the
volume o f check transactions outside New Y ork City,
department store sales, advertising, and life insurance
sales showed virtually no change other than seasonal.
The principal exception to the general tendency in
July was an increase in registrations of new passenger
automobiles which indicate roughly the number o f retail
sales o f new passenger cars to consumers. This increase
was contrary to the' usual seasonal movement and brought
registrations to the highest level for the corresponding
month since 1929. Registrations and also production of
passenger automobiles, on an average daily basis, are
shown in the accom panying diagram from 1929 to date.
Since last December, production had been proceeding at
a higher rate than registrations indicating an accumula
tion of stocks in dealers hands, as usual in the first half
of the year. In July, production declined to about the
level reported fo r registrations.
(Adjusted for seasonal variations, for usual year to year growth,
and where necessary for price changes)
1934

1935

July

M ay

June

57
60
52
62
91

58
59
47
69
85

58
63
53
76
82

58
52
52p
80p
93

71
67
78
62
58
54
69

72
69
60
77
74
64
57
71

76
70
61
85
80
58
62
70

76
69
59
78
71
58

Bank debits, outside New York C it y ... .
Bank debits, New York C ity ....................
Velocity of demand deposits, outside
New York C ity .........................................
Velocity of demand deposits, New York
C ity.............................................................
New life insurance sales.............................
Factory employment, United States . . . .
Business failures...........................................
Building contracts........................................
New corporations formed in N. Y. State

62
48

64
42

66 p

52
63
81
45

41
54
82
43

21
66

45
55
81
44
25
59

General price level*.....................................
Composite index of wages*........................
Cost of living*..............................................

138
182
137

143
186
140

144
188
139

July

P rim a ry Distribution

Car loadings, merchandise and misc........
Car loadings, other......................................
Wholesale trade............................................
Distribution to Consumer

Department store sales, U. S....................
Department store sales, 2nd D ist.............
Chain grocery sales......................................
Other chain store sales................................
Mail order house sales.................................
New passenger car registrations...............
Gasoline consumption.................................

66 p

General B usiness Activity

p Preliminary.

* 1913 average= 100

50
68

49
56
82p

42
26
60
145p
18 8p

140

FEDERAL RESERVE AGENT AT NEW YO R K

P r o d u c tio n

E m p l o y m e n t a n d P a y r o lls

From preliminary evidence there appears to have been
little change, on the whole, in the rate of activity in
basic industries in August. In the automobile industry
operations were sharply reduced by shutdowns con
nected with vacations and model alterations, and bitu
minous coal mining during the first half o f the month
did not manifest the usual seasonal expansion. However,
steel mill operations gained during August and at the
end of the month the operating ratio was approximately
50 per cent of capacity, as compared with a 39 per cent
average fo r July and a 52 per cent average fo r February,
the high point of the year. A ctivity in the cotton textile
industry, while still on a restricted basis, also increased
somewhat in August, and electric power production con
tinued the upw ard movement begun in May.
The movement o f industrial activity from June to July
was marked by a somewhat smaller contraction in the
volume of manufactures than usually occurs in July,
but there was a sizable reduction in output of coal from
the relatively high level that had prevailed in June. As
a net result the Federal Reserve Board index o f in
dustrial production remained at 86 in July, unchanged
from the preceding month. Cotton goods manufacture
and automobile output decreased in accord with the
experience of past years, and meat packing operations
remained at a low level, but steel production was on an
upgrade during the month, follow ing the Independence
D ay shutdown, and the average rate o f operations fo r
the month as a whole was only slightly below that o f
June. Contraction was also of less than usual seasonal
proportions in wool m ills; in silk and rayon mills, as
well as in shoe plants, operations were increased.
Machine tool orders continued to rise and the seasonally
adjusted index reached the highest point since Janu
ary 1930.

In New Y ork State, factory employment and payrolls
showed declines o f somewhat less than the usual seasonal
proportions from the middle of June to the middle of
July, follow ing two months in which more than seasonal
decreases had occurred. The food industry showed the
most pronounced employment gain in July owing to
large seasonal increases at canning and preserving fa c
tories. Decreases in the number o f workers employed
were reported in the clothing, metals and machinery, and
stone, clay, and glass products industries.
Em ploym ent and payrolls in m anufacturing indus
tries throughout the United States also showed a smaller
reduction between mid-June and m id-July than has been
shown in most previous years. Declines in the number
o f workers employed occurred in the automobile in
dustry, owing to the holiday shutdown and the usual
slackness prior to the beginning of work on new models,
and reductions were reported in employment in the
metals and metal products groups other than machinery,
and in the textile and clothing industries. These reces
sions, however, were offset to a considerable extent by
gains in working forces in machinery, lumber, shoe, and
food plants. The number o f persons employed in p ro
duction o f six im portant construction materials reached
the highest level since February 1932, after allowance
fo r usual seasonal variation.
A m ong the nonm anufacturing industries, employment
in building construction activities rose somewhat, but
the number of workers engaged in coal mining was
sharply reduced and employment in retail trade de
clined in accordance with the usual seasonal tendency.
The number o f workers employed on projects financed
by Federal emergency outlays was reduced somewhat
during July. A decrease of more than 180,000 workers
engaged by the Federal Em ergency R elief A dm inistra
tion was offset in part, however, by the further enroll
ment o f approxim ately 53,000 men at Civilian Conserva
tion Camps.

(Adjusted for seasonal variations and usual year to year growth)
1934

1935

F o r e ig n T r a d e

July

M ay

June

July

37
38
46
48

47
54
52
63

45
53
48
67

45
56
50

52
74

48
73

59 p

10 2

10 1 p

72
82

85
112

60 p
67 p
69 p

M etals

Pig iron ...........................................................
Steel.................................................................
Lead.................................................................
Z inc................................................................

Automobiles

Passenger cars...............................................
M otor trucks.................................................
Fuels

Bituminous coal............................................
Anthracite coal...........................................
Petroleum, crude..........................................
Petroleum products.....................................
Electric pow er...............................................

71
67
73

65
72

69
67
74 p

69
78
63
85
99

73
113
56
74
104

71
116
55
85
9 6p

126
79
62
83

76
75
87
82

70
83

43
51
74
33

45
53
74
60

75 p

Textiles and Leather Products

Cotton consum ption....................................
W ool mill a ctiv ity...........................
Silk mill a c t iv ity ......................
Rayon deliveries*.........................................
Shoes...............................................................

72
12 0 p

61p
104p
1 0 5p

Foods and Tobacco Products

M eat packing................................................
W heat flour....................................................
Refined sugar deliveries..............................
Tobacco products.........................................

78
63 p

44
50
73
76

Miscellaneous

Cem ent.........................................................
T ires......................................................
Newsprint paper...........................................
Machine tools...........................................
p Preliminary

* For quarter ended

69 p
106

This country's foreign merchandise trade showed in
creases during July, both as compared with the previous
month and with a year ago. E xports amounted to
$173,000,000 and imports to $178,000,000, resulting in a
small im port balance, as in A p ril and May. The value
o f J uly exports exceeded that o f a year ago by 7 per
cent and was larger than in the corresponding month
o f any year since 1931. Imports, continuing the recent
tendency toward greater expansion than exports, were
40 per cent above a year ago and larger than in July
o f any year since 1930.
A m ong the exports, most o f the principal food and
farm products were shipped abroad in smaller quantity
and value than in July 1934, continuing the decline of
the past year, during which the volume o f exports o f
agricultural products declined to the lowest level since
1877, according to the Department of A griculture.
E xports o f raw cotton declined 8 per cent in volume
from a year ago, which, however, is a smaller reduction
than in most recent months. W hile the demand for
Am erican cotton was less than a year ago in the United
Kingdom , Germany, and countries o f the F ar East, it
was larger in a number o f other cotton im porting coun-

MONTHLY REVIEW, SEPTEMBER 1, 1935

tries, notably France.
E xports of unmanufactured
tobacco were substantially reduced in quantity from last
y e a r’s volume, but showed a gain in value o f 30 per
cent, due to a large increase during the past twelve
months in the price of tobacco. Shipments abroad o f
passenger automoblies were 16 per cent smaller in num
ber than in July 1934, indicating a reversal of the com
paratively active foreign demand fo r them in the first
half of the year. On the other hand, the number o f
motor trucks and busses exported showed an increase
over a year ago of 62 per cent. Considerable gains, both
in quantity and value, occurred also in exports o f crude
and refined petroleum, fertilizers, and electric refriger
ators.
Im ports during July of a m ajority o f im portant
products continued to show advances over a year ago.
Sugar receipts were more than six times the compara
tively low volume of last year, when the sugar quota for
the Philippines was tem porarily exhausted. Imports of
wool and flaxseed were more than double the quantities
of a year ago. There were likewise sizable increases in
quantity receipts of copper, nickel, burlap, raw silk, food
products, and rubber, ranging from a gain of 77 per cent
in copper to 13 per cent in crude rubber. Exceptions to
the general tendency occurred in imports of fertilizers,
tin, woodpulp, and newsprint paper, all o f which showed
reductions compared with last year.
D e p a r tm e n t S tore T r a d e
D uring the first half of August, total sales o f the
reporting department stores in the Metropolitan area
of New Y ork were 1.8 per cent higher than in the corres
ponding period last year, and more than the usual sea
sonal expansion appears to have occurred from July to
August. In Northern New Jersey sales continued to run
below a year ago, but New Y ork City stores showed an
average increase o f 3 per cent.
Total July sales o f the reporting department stores
in this district were 9.6 per cent higher than a year ago,
and even after allowing fo r one more shopping day
this year than last, the increase fo r J uly was the largest
since December. The New Y ork City department stores
registered the most substantial advance in average daily
sales since March 1934, and the Buffalo stores reported
the largest increase since December. Stores in the Capi
tal District, Northern New Y ork State, Southern New
Y ork State, and Westchester and Stam ford also reported
the largest increases in average daily sales in several
months, and the decline in average daily sales of the
Hudson River V alley District stores was the smallest
in five months. Average daily sales in the Rochester,
Syracuse, and Bridgeport stores, however, showed smaller
increases over a year ago than in June, and average
daily sales in the Northern New Jersey stores showed
a decrease from last year, follow in g a considerable
advance in June. Sales o f the leading apparel stores in
this district were 15.6 per cent higher than a year ago,
and on an average daily basis showed the most favorable
year to year comparison since March 1934.
Department store stocks of merchandise on hand, at
retail valuation, continued somewhat below a year ago,
while apparel store stocks remained larger. Collections
of accounts outstanding at the end of the previous month

were higher in J uly 1935 than in J uly 1934 in the
department stores in all localities and also in the apparel
stores.
Percentage
change
July 1935
compared with
July 1934

Per cent of
accounts
outstanding
June 29
collected in
July

Locality
Net
sales
New Y o r k ...........................................................
Buffalo.................................................................
Rochester............................................................
Syracuse..............................................................
Northern New Jersey.......................................
Bridgeport..........................................................
Elsewhere............................................................
Northern New York S tate.........................
Southern New York State..........................
Hudson River Valley D istrict...................
Capital D istrict.............................................
Westchester and Stamford.........................

+ 1 1 .9
+ 1 2 .9
+ 7 .5
+ 8 .9
+
+
+
+
—
+
+

5 .3
6 .6

Stock on
hand end
of month

1934

1935

— 3 .0
— 6 .4
— 3 .1
— 8 .8
— 6 .7
+ 3 .1
— 13.2

4 7.7
4 3.4
42.3
3 2.1
4 0.1
37.0
25.3

4 8 .8
4 7 .0
4 4.2
3 5.0
4 1 .0
3 8 .0
28.0

— 4 .1

4 3.2

4 4.6

+ 5 .7

4 0 .6

4 2 .7

7 .4
6 .6
0 .6
8 .8
8 .2

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

+ 9 .6

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

+ 1 5 .6

W h o le s a le T r a d e
July sales o f the reporting wholesale firms in this
district were 13.6 per cent higher than last year, the
largest percentage increase since December. The drug,
paper, and jew elry concerns reported the largest in
creases in more than a year, and sales o f the grocery
and shoe firms were ahead o f a year ago by the largest
percentages in 7 or 8 months. The moderate gain in
sales recorded by the hardware concerns was the most
favorable year to year comparison since February, and
the rather substantial gain in sales o f m en ’s clothing
was the largest in 3 months. The increase in yardage
sales o f silk goods reported by the National Federation
of Textiles follow ed 6 months in which declines were
shown. The small advance in diamond sales followed
a much larger increase in June, and the cotton goods
and stationery firms reported sales lower this year than
last.
Stocks o f merchandise on hand held by the grocery,
hardware, and diamond concerns continued higher than
a year ago, but stocks held by the drug and jew elry
firms showed the largest reductions in over a year.
Percentage
change
July 1935
compared with
July 1934

Per cent of
accounts
outstanding
June 29
collected in
July

Com m odity
Net
sales
M en’s clothing...................................................
Cotton goods.....................................................
Shoes

.............................................................

S ta tio n e ry .........................................................

Weighted average.....................................

+ 1 0 .9
+ 1 5 .0
— 8 .6
+ 7 .8 *
+ 2 6 .7
+ 2 7 .2
+ 8 .2
— 5 .7
+ 1 9 .8
+ 5 .2
+ 3 1 .9
+ 1 3 .6

Stock
end of
month
+ 4 .5

— 10.5
+ 9 .2
+ 2 1.0
— 8 .4

1934

1935

90.6
3 8.0
37.9
63.8
39.6
18.0
4 5.9
4 7.5
4 4.6
| 27.9

9 4.3
4 6.4
4 2.8
6 2.9
4 1.4
2 3.0
4 7.4
57.9
46.1
} 28.4

54.4

5 8.4

* Quantity figures rep ortedly the National Federation of Textiles, Incorporated,
not included in weighted average for total wholesale trade.

FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, SEPTEMBER 1, 1935
B u s in e s s

C o n d it io n s

t h e

n i t e d

S t a t e s

(Summarized by the Federal Eeserve Board)
ACTORY employment and output were maintained in July at the June
level, though usually there is a considerable decline at this season. Activity
at mines showed a substantial decrease, reflecting a sharp reduction in out
put of coal.

P r o d u c t io n

Index Number of Production o f Manufactures
and Minerals Combined, Adjusted for Seasonal
Variation (1923-25 average = 100 per cent)

Index o f Factory Employment with Adjustm ent
for Seasonal Variation (1923-25 average =
100 per cent)

KH8 S*

and

m ploym ent

The Federal Reserve Board’s seasonally adjusted index of manufactures
showed an increase in July, while the index of mineral production showed a
marked decline, with the consequence that the index of industrial production
remained unchanged at 86 per cent of the 1923-25 average. For the first seven
months of the year industrial output was 6 per cent larger than a year ago.
Activity at steel mills, which had declined during June, advanced considerably
during July and the first three weeks of August and there was also a substan
tial increase in the output of lumber. Automobile production showed a de
crease from the high level prevailing earlier in the year, reflecting in part
seasonal developments. Output of textiles increased somewhat in July, owing
chiefly to increased activity at silk mills. In the woolen industry the recent
high rate of activity continued, while at cotton mills daily average output
declined by about the usual seasonal amount. Meat packing remained at an
unusually low level. At mines, output of bituminous coal decreased sharply
in July, following an advance in the preceding month, and there was also a
sharp reduction in output of anthracite.
Factory employment, which usually declines at this season, showed little
change from the middle of June to the middle of July. Employment increased
somewhat in the machinery, lumber, furniture, and silk industries and there
was a large seasonal increase in the canning industry. Decreases of a seasonal
character were reported for establishments producing cotton goods and
women’s clothing, while in the automobile industry employment declined by
more than the usual seasonal amount. At coal mines employment showed a
marked decrease in July.
The total value of construction contracts awarded, as reported by the
F. W. Dodge Corporation, increased further in July and the first half of
August, reflecting an increase in nonresidential projects. Residential building
continued in considerably larger volume than a year ago, with increases from
last year reported for most sections of the country.
Department of Agriculture estimates as of August 1 indicate a cotton
crop of 11,800,000 bales, about 2,200,000 bales larger than the unusually small
crop last year. The indicated wheat crop, while larger than a year ago, is
considerably smaller than the five year average for 1928-32. Crops of corn
and other feed stuffs are substantially larger than last season.
D is t r ib u t io n

Daily average volume of freight car loadings declined in July, reflecting
a marked decrease in shipments of coal. Department store sales showed a
seasonal decline and the Board’s adjusted index remained unchanged at
80 per cent of the 1923-25 average.
P

Value of Construction Contracts Awarded (Three
month m oving averages o f F. W . Dodge Cor
poration data for 37 States, adjusted for
seasonal variation)
BILLIONS
OF DOLLARS

U .S . SEC Ul R I T I E S / ^ ' ^
1

1
A L L O TH IER
1
OAMc
LUMINW

-" T ^
X

^
L O A N S ON S E C U R ITIE S —

v sjv / ~

v' ^ O T I HER S E C U R IT IE S
i

1932

r ._ .

l . I

1933

L-«-

Wednesday Figures for Reporting Member Banks
(Latest figures are for August 14)

r ic e s

The general level of wholesale commodity prices showed little change
during July and advanced slightly in the first three weeks of August. For
the seven week period as a whole there were substantial increases in the
prices of hogs, lard, silk, and scrap steel, while cotton declined. Wheat, after
advancing considerably during the latter part of July, declined somewhat in
the early part of August.
ank

C r e d it

Excess reserves of member banks increased by $340,000,000 in the five
week period ended August 21 as a consequence principally of a reduction in
the balances held by the Treasury with Federal Reserve Banks. There were
also moderate imports of gold from abroad.
Total loans and investments of reporting member banks in leading cities
showed a net decline of $290,000,000 during the four weeks ended August 14.
Holdings of direct obligations of the United States Government decreased by
$220,000,000 following a substantial increase in the middle of July. Loans
declined by $180,000,000 in the latter part of July but subsequently advanced
by $40,000,000, while holdings of Government guaranteed and other securities
increased by $70,000,000 in the four week period.
Yields on Government securities rose slightly during this period, while
other short term open market money rates remained at low levels.

Full text of Economic Policy Review (Federal Reserve Bank of New York) : September 1, 1935

FRASER