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The Monthly Business Review Covering business and industrial conditions in the Fourth Federal Reserve District FEDERAL RESERVE BANK OF CLEVELAND D. G. Wills, Chairman of the Board VOL. I CLEVELAND, OHIO, JUNE 1, 1919 E ARE no longer awaiting prosperity; it is already with us. W NO. 5 Business is breathing easier. The announcement of the Peace Treaty, the convening of Congress, the statement given by experts that building prices east of the Mississippi are settled, and the policy of the open market, have all acted as stabilizers to the clearing up of the business situation. The public is slowly adjusting itself to the conviction that there is to be no rapid post-war drop in prices, and is reconciling itself to the probability that the old pre-w ar prices may never again be reached. One of our correspondents has given his reasons why prices will not revert to pre-war basis, by saying that, “A new generation of men has come into business since the pre-war prices and wages were considered normal; a group, consisting of many hundreds of thousands, to whom what you and I call the abnormal rates of today are altogether normal; a group, which because of its youth— a word some times spelled ‘optimism’— and because of its abounding vitality, exerts an influence upon the thought of the time and the tendency toward new undertakings that is anything but negligible. Second, the adoption of the Federal Reserve System makes for a freer find more rapid flow of credits which, so far as prices and wages are concerned, is a near equivalent of an increase in the volume of money and what we call money. These two facts weigh heavily against a return to pre-war levels.” W hat would have been accepted as a good pre-war volume of business is much less likely to be acceptable as sufficient volume for our reconstruction work. The law of price and cost is apparently controlling conditions rather than the law of supply and demand. The rise in commodity prices has been accompanied by a considerable increase in the amount of money in circulation and an increase in bank deposits. The amount of money in circulation per capita during the past five years has increased 59 per cent. During the same time the bank deposits have increased almost threefold. Conditions generally have taken on a slow but substantial growth during the month of May. A significant event in the business situation was the resignation of the Government’s Industrial Board, which terminates the price stabilization program and creates an open market free for competition. This means that all lines of business, such as building, construction, metal trades and manufacturing will proceed on their own readjustment plans from a war to a peace basis. It is thought by the steel industry that the creation of an open market will probably force greater activity. THE MONTHLY BU SIN ESS REVIEW. 2 The realization that there is to be no probable return to pre-war prices has encouraged buyers to place orders with more confidence. As a result, business prospects have improved, retail trade has increased in volume, prices are becoming more stable, and business generally is on a firmer footing. M a n u fa c tu rin g . — Two important factors which are sure to stimulate manufacturing in the district are the lifting by the administration of the embargo on ship building for foreign countries and the definite adjustment of steel prices. While manufacturers are awaiting developments, prospects are strong in changes for the better in the near future. There is a feeling that if natural competitive conditions are restored a reasonable resumption of activity in this field may be expected. While many of the mills in the Pittsburg Area are reported running only about three days a week, confidence is not lacking, and a satisfactory line of inquiries for new goods is being made. Manufacturers of automobile accessories report improvement, and, while makers of automobiles, both trucks and pleasure cars, are working at full capacity, they are unable to keep up with the inflow of orders. The shoe manufacturers also report more orders than they can fill, with prices high and firm, and merchants placing large orders for fall trade. Clothing merchants are buying better grades at fancy prices. The machine tool business is less active, and little encouragement is held for the immediate future. Plants are endeavoring to hold their organizations together by working on stock. Iron a n d S te e l . — It is to be hoped that steel has turned the corner. from 50 to 75 per cent of capacity. Mills are running at The final declaration of open market for iron and steel products has caused an optimistic feeling among the manufacturers. There is no positive evidence of improve ment by the placing of new orders, but it is thought that the turning point has Materials are plentiful and there is an abundance of labor. been reached. The principal demands are from the auto mobile and oil field trades, in the form of piping and sheets. The announcement of bids for a 400,000-ton order for steel rails to be placed by the Railroad Administration will doubtless tend to stimulate further orders. The pig iron market is practically void of new inquiries. and only small lots of foundry iron are being delivered. Blast furnaces continue to close down, It is thought that the output in the Pittsburg Area for the past thirty days will prove to be the smallest for some time. The demand for semi-finished steel is quiet. However, boiler tube makers report increased demands, with an encouraging future, while the makers of nuts, hoops and bands are able to keep ’their plants running at about 50 per cent capacity. thing like full time have been abandoned. Efforts to keep the tin plate mills going at any A g ric u ltu re . — The salient feature in the agricultural field is the promise of an enormous wheat crop. The increase for the district is estimated at 33 per cent over that of last year. The Government’s guarantee on the price of wheat, together with the prospective yield, has made the farmer enthusiastic over the outlook. 3 THE MONTHLY BU SIN ESS REVIEW. The farmer has been caused some concern by reason of the wet weather, which has delayed oat sowing, and, inasmuch as the season is now late and the time for corn planting is so near at hand, it is thought that a large number of the farmers will cut down the acreage for oats. Many of them are carrying over quantities of last year’s extra large crop, which will be kept to offset the shortage, and for those who did not hold over last season’s crop the unusual quality of the early oat crop will doubtless overcome a shortage in acreage. Some farmers claim that the heavy frost in April was a benefit to the grain crop in retarding the growth and thereby strengthening the stock. Favorable weather will be needed for corn planting, as the cold and heavy rains have necessi tated the postponement of extensive planting until about June first. All grass and pasture lands are reported to be in excellent condition, and this, together with the high price of beef, gives to the farmer every incentive to increase cattle raising. The backwardness of the season saved much of the early fruit from the April frost, but the damage is estimated at from 5 to 50 per cent according to locality, sweet cherries being most harmed. Fruit men expect a large peach and late cherry crop. Considerable interest is being shown in tile drainage in northern Ohio, and the banks, railroads, farm bureaus and farmers are co-operating in the movement. F u o L — With the opening of lake transportation there is a noticeable improvement in the coal situation in the Pittsburg Area. demand is fair, with prices firm. Better buying on the part of the railroads is reported. The general The reports from the Lexington and Columbus Areas are less favorable, and indications point to a continued decline, the production at present being about 50 per cent of that of last year. Many of the mines have closed down, particularly the small ones, with the miners in a very restless state of mind. The coke industry seems to be at a standstill. The free coke supply is exhausted. renewed activities are looked for, with prices slightly advancing. Some slight The situation is somewhat affected by the fact that large consumers are to a great extent supplying their needs product coke ovens. from their own by The demand for gasoline and coal oil continues strong, while the demand for crude and lubricat ing oils is weak, due to the closing down of factories and the inability to secure bottoms for export trade. There is increased production from the oil wells in the Lexington Area, with new wells being sunk. A distinct reduction is noted in the production of oil from the Ohio fields. M e r c a n t i l e L in o s *— The volume of mercantile trade continues strong, and jobbers are having increased demands for merchandise in larger quantities. tendency is expected. expectations. Instead of a decline in prices, a rising A healthy fall business is predicted, with fall delivery orders exceeding Retailers are even more emphatic in expressing their optimism, reporting a 40 to 60 per cent sales increase. The report of the National Retail Dry Goods Association Convention held in May confirms this large increase, covering practically the entire east and middle west. 4 THE MONTHLY BUSINESS REVIEW. While retail dealers are still operating with caution, they are buying more often and with greater confidence, and are also showing a marked preference for goods of better quality. The markets are largely cleaned out on high grade merchandise, and future increases depend upon the ability of the manufacturers to deliver in time. L a b o r . — The two largest labor disturbances of the month have been the strike of the employees at the Willys-Overland automobile factory at Toledo, and the Pittsburg street car strike. at the Willys-Overland factory is now passing into its third week. The*strike The workers are demanding a forty-four hour week, while the company is maintaining a forty-eight hour week. After continued efforts to effect a settlement, negotiations have practically ceased and both sides are consistently mark ing time. The Pittsburgh street car motormen and conductors walked out when they failed to reach an agreement with the receivers of the Pittsburgh Railway Company on the question of submitting a wage dispute to the W ar Labor Board. of twelve cents per hour. This dispute is the outgrowth of a demand for an increase in pay After a four-day tieup, the cars have resumed running, following a con ference between the receivers and the employees at which it was agreed to arbitrate the matter with the W ar Labor Board. Upon report of the Board it is agreed that the receivers will petition the United States District Court for permission to put into effect the terms prescribed by the W ar Labor Board. If after twenty days the Court takes no action, the conditions shall be no longer obligatory upon the railway employees. Generally throughout the district the army of unemployed is rapidly decreasing — the Federal Employment Bureau at Cleveland reporting local conditions at a near return to normal. A labor short age is predicted, and many employers are taking on extra help to insure themselves against such a shortage. An immediate shortage is found in agricultural labor, while the greatest surplus is found in the coal and steel industries and in the building trades. B u ild in g . —Operations in the Cleveland Area increased 10 per cent during May over those of April. This was principally small work, such as dwellings. It is thought that added operations on larger construction work will follow the rather definite announcement of experts that present building prices are stable and that no further reductions may be expected. Aside from the cost of materials the increased demands for higher wages among several of the building trades will tend to maintain the high cost of construction work. There are ample funds available for construction projects; skilled labor is waiting; the need is great; the prices are pronounced stable. Therefore, it would seem that nothing can be gained by delay. C la y P rod ucts.— The entire clay industry continues its exceptional prosperity, with plants running full time, raw materials obtainable and labor plentiful. is good. silos. The pottery and stoneware business There is an increasing demand for drain tile and hollow tile for dwelling construction and Makers of fire brick are having a good demand, largely from furnace owners, for relining purposes. The demand is less for other grades of brick. 5 THE MONTHLY BU SIN ESS REVIEW. C o llectio n s . —Collection conditions throughout the District average from fair to good. While considerable paper has been offered in some sections, the amount has not created any uneasiness. Some difficulty may be experienced in the immediate future, until after the next income tax pay ment. T e x tile s . — Continued improvement is found in textile lines. Although retailers still show a disposition to restrict buying to scarcely more than for current needs, there has been a noticeable improvement in the demand, in spite of a tendency toward higher prices. Wholesalers of dry goods, notions and men’s furnishings report orders increasing both in number and amount. The weaving and knit goods industries show some slight increase in activity. T ra n s p o rta tio n . — Slight gains are noted in both electric and suburban train service, while slightly better steam transportation is reported. There has been a distinct falling off in the demand for transportation to Europe on the part of the foreigners in the District, possibly due to an increased realization of the difficulties of obtaining such accommodations at the present time. M o n e y a n d Investm ents. — While the distribution of the Victory Liberty Loan was not as large as the Fourth Liberty Loan by approximately a million buyers, it was very gratifying and suffi cient to leave the banks free to handle the needs of industry. There is a very good demand for money, with rates holding firm. A slight decrease of savings deposits in foreign departments is noticed, but banking conditions generally are very satisfactory. A wider use of bankers’ acceptances and trade acceptances is noticed, and a greater use of them is anticipated. The demand for commercial investments is not as yet developed, but a large volume is being held up awaiting the settled conditions which are expected in the near future. The stock market reflects the improved outlook by a stiffening in the bids and prices asked. rampant speculation in oil stocks is reported. New B a n k s E n te rin g S yste m . —The A following banks were admitted into the Federal Reserve System of the Fourth District, from May 1 to the 22 inclusive. RESO U RCES. The The The The The Farmers & Merchants Bank Co., Peoples Bank Company, Security Trust Company, Firestone Park Trust & Savings Bank, Farmers Bank Company, Metamora, O. Frazeysburg, O. Wheeling, W7. Ya. Akron, O. Pandora, O. $ 298,000 483,000 2,827,00(? 3.490.000 2.231.000 6 THE MONTHLY BU SIN ESS REVIEW. BUILDING OPERATIONS FOR MONTH OF APRIL Permits Issued New Construction 1919—1918 Akron......... Cincinnati.. Cleveland... Columbus. . Dayton....... Erie......... Lexington. . Pittsburgh.. Springfield.. Toledo........ Wheeling... Youngstown. 685 178 323 274 268 231* 107* 355 39 253 14 159 202 146 194 162 154* 179* 37* 197 18 92 8 109 Valuations Alterations 1919—1918 New New Construction 1919 126 510 951 128 67 81 512 952 110 ... 183 19 180 51 28 152 8 128 45 32 2,468,000 205,955 1,204,100 462,225 551,784 229,059* 133,868* 480,931 41,230 482,237 11,319 312,112 Construction 1918 452,741 188,760 1,503,300 231,815 417,053* 197,013* 37,280* 577,488 21,500 105,181 8,715 223,940 Attentions 1919 Alterations 1918 Increase or Decrease of total valuation* 1919 over 1918 Per Cent of Increase Deereaee 122,775 59,215 2,078,819 229,895 201,125 45,965 333,260 293,900 259,840— 122,980 210,245 143,145 99,295 234,026 32,046 96,588 532,452 193,893 242,002 11,650 3,200 28,180 114,743 79,558 412,241 13,993 11,165 5,432 15,195 18,625 84,742 406. 0 11. 7 14. 4— 32 3 56 1 16 2 259 0 31 3 114 0 223 1 27 3 34 9 TOTAL.............. 2886 1498 (2243 2020 6,582,820 3,964,786 1,596,238 1,070,926 3,143,346 *Figures include alterations and additions. 62.4 POST OFFICE RECEIPTS April 1919 April 1918 96,233 77,921 322,210 452,664 135,389 66,758 35,070 18,022 443,727 108,814 30,003 42,436 522,822 142,045 79,785 36,795 23,276 126,128 29,880 40,166 Increase or Decrease Percent of Increase or Decrease 18,312 23.5 70,158 6,656 13,027 1,725 5,254 15.4 17,314 123— 2,2 7 0 - 4. O 19.5 d 0 29.1 I C Q V .4 — 5.3— of an increase. CLEARINGS April 16 to May 15 1919 1918 Akron................................. Cincinnati.......................... Cleveland........................... Columbus.......................... Dayton............................... Erie.................................... Lexington.......................... Pittsburgh.......................... Springfield.......................... Toledo................................ Wheeling............................ Youngstown...................... 36,978,000 230,038,411 380,649,307 49,627,300 16,625,149 8,876,175 6,110,881 566,207,502 5,491,735 53,865,825 17,460,576 18,005,801 23.696.000 246,420,714 332,414,313 43.535.000 17,291,081 9,517,389 4,300,294 478,423,103 4,734,332 44,389,579 17,705,589 14,829,737 TOTAL 1,389,936,662 1,237,257,131 Increase or Decrease 13,282,000 16,382,30348,234,994 6,092,300 665,932641,2141,810,587 87,784,399 757,403 9,476,246 245,0133,176,064 152,679,531 Percent of Increase or Decrease 56.0 6 . 6— 14.5 13.9 3.8— 6.7— 42.0 18.3 15.9 21.3 1.3— 21.3 12.3 THE MONTHLY BU SIN ESS REVIEW. ___________ _ 7 STATEMENT OF FEDERAL RESERVE BANK OF CLEVELAND. MAY 16, 1919. RESOURCES Gold Gold Gold Gold coin and certificates.......................................................................... settlement fund with F. R. Board................................................. with Federal Reserve Agent............................................................ redemption fund................................................................................ 15,431,000 69,520,000 142,853,000 1,143,000 TOTAL GOLD RESERVE...................................................... 228,947,000 Legal tender notes, silver, etc................................................................... 1,187,000 TOTAL CASH RESERV E...................................................... 230,134,000 Bills discounted—Secured by Government War Obligations.............. Bills discounted—All other....................................................................... Bills bought in open market..................................................................... 115,743,000 4,923,000 20,464,000 - Total bills on hand..................................................................... U. S. Government long term securities................................................... U. S. Government short term securities................................................. 141,130,000 1,083,000 16,004,000 TOTAL EARNING ASSETS.................................................. 158,217,000 Uncollected transit items.......................................................................... 5% Redemption fund against F. R. bank notes.................................... All other resources...................................................................................... 63,028,000 797,000 1,249,000 TOTAL RESOURCES.............................................................. 453,425,000 LIABILITIES. Capital paid in ............................................................................................ Surplus fund................................................................................................ Government deposits................................................................................. Due to members—Reserve accounts........................................................ Deferred availability items........................................................................ Other deposits............................................................................................. 9,200,000 3,552,000 17,155,000 130,508,000 50,338,000 265,000 TOTAL GROSS DEPOSITS................................................... 198,266,000 Federal Reserve notes in circulation........................................................ Federal Reserve bank notes in circulation.............................................. All other liabilities..................................................................................... 225,171,000 15,129,000 2,107,000 TOTAL LIABILITIES............................................................. 453,425,000 8 THE MONTHLY BUSINESS REVIEW. PICKUPS ON BUSINESS TOPICS F irst honors in the building of ships during the war were awarded by the Shipping Board to the Great Lakes District. Held by canal restrictions to a lighter type of vessel than was built on the seaboard, the district did not produce so many net tons as other sections, but outstripped all other districts in the number of ships. In one year it put into service 125 more vessels than were delivered from all Ameri can yards in the year before the United States entered the war. •miimhmihhiiiiimhiiiiimmiimii The Industrial Board of the Department of Commerce has closed its doors and moved away the furniture. Secretary Redfield has said no further effort of any kind w ill be made to stabilize prices. According to estimation 74.1 of the 96.3% of the w orld’s production of coal-tar dyestuffs was produced by Germany prior to the war. The United States produced 3 .3 %. While in 1914 there were only six dye factories in the United States w ith a production of 3,000 tons yearly, there were, in 1918, fifty factories with an annual output of 35,000 tons. Reports of the Federal Farm Loan System show that 3,800 Farm Loan Associations have been organized and over 84,000 loans have been closed, amounting to over $210,000,000. The greatest users o f the system are the districts in the order given: Spokane, Omaha, St. Paul, Houston. B y States they are: Texas, Iowa, North Dakota and Kansas. The average loan is $2,520. iititiitiniii ihmnttmiiiiitititiM i It is reported that Lenine has flooded Germany w ith per fect counterfeits of money. It is stated that similar counter feits of British and French money have been printed. The situation thus created is very serious in Germany and strict measures are being taken to counteract the menace in France and England. The object of Lenine is to destroy the value of all paper money. mmmmHHHitHmiminiumH Inasmuch as European countries are unable to pay cash for goods, the only w ay for us to sell is to extend to them the credit they need. To do this movements are being started to interest the private investor in the purchasing o f foreign securities. iihhiihmmmiimimmiiiiiiiiiimiii> The tax on the transportation of persons is 8% of the amount paid. The tax on the transportation of property by freight is 3% of amount paid. Shipments by express are subject to a tax of 1 cent for each 20 cents of the amounts paid. Questionnaires, sent out by the Department of Labor to several thousand building and loan associations disclosed that more than 40% of them did not have available funds to m eet the applications for building loans. The movement to estab lish Federal Home Loan Banks was approved by more than 90% of 1200 associations. ill IIIIMilIIIIHII HIMIllll I1III1III' lllllllltMMMIIMIIIIimilllllllHlli While we hear many complaints regarding increase in prices, yet we should be somewhat comforted when we read that we have suffered less than any of our allies. 'While the rise in the United States was 107% over the average of the year 1913, Canada’s highest price level was 115%; that of the United Kingdom 133%, while in France the increase was 235%. The organization of the new French-American Bankintr Corporation by the Comptoir N ational d ’Escompte de P a r if the First N ational Bank of Boston and the N ational Bank of Commerce in New York, is of special significance to those interested in the development of the Federal Reserve system IIIIIIIHIMHMIIIIIIHIIIMtlllMIIHI Conservative estim ates place the average annual require ments of new dwelling houses in the United States at 600,000, and a recent official estim ate placed the present shortage at 1,000,000 houses. A t the very low average of $2,000 each, this would mean $2,000,000,000 of new construction right now aw aiting reasonable assurance concerning the stability of existin g average cost of material and labor. IIIIIIIHIIHMHHIHIMHHHIIMIMM According to latest official estim ates this country’s aggre gate crop acreage under cultivation in 1918 was 367,738,000 acres— more than 574,000 square miles. Taking the estimated number of farmers, 6,717,000, the average for each was less than 55 acres. W ithin the past ten years there has been an addition of more than 56,000,000 acres to the total in use for crop purposes. The value of farm lands is steadily increasing. The value of what is classed as plow-lands on March 1, 1919, was $74.31 an acre, against $68.38 a year ago, $62.17 two years ago, and $58.39 in 1916. The present average by states ranges from $169 an acre in Iowa, where 21,613,000 acres were cultivated last year, to $24 an acre in Alabama, which last year had 10,569,000 acres under cultivation. Several combinations o f American national banks for international purposes already have been made, under the provisions of the amendment to the Federal Reserve Act* but this is the first case in which a foreign bank becomes part owner. The French bank is owner of h alf the stock The capitalization is $2,000,000, with a surplus of $500 000 There is intimation that the new Congress intends to enact strong legislation for the purpose of suppressing B ol shevism in the United States. The opposition to such legisla tion may be based on the question of its rights to curtail free speech. Experts in the Bureau of Internal Revenue are making a study of business practices in regard to amortization, deple tion, salaries, etc., which will be the basis for future regula tions. The date set for the return of the telegraph and telephone service to private ownership is July 31. INMillllltl IIIIMlMINIIlfHIIII..... The balance o f trade in favor of the United States has amounted up to 15 billions of dollars in four years.
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