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MONTHLY BUSINESS REVIEW Covering f i n a n c i a l , industrial Fourth F e d e r a l R e s er v e D i s tr i c t and agricultural c o n d itio n s Federal Reserve Bank of Cleveland Vol. 24 Cleveland, O hio, June 30, 1942 Fourth district business continues on a selective basis. Activity in industries participating most directly in the war effort increased in May and the forepart of June. In the consumers’ goods field, output of numerous articles, chiefly of the durable type, has been restricted by Federal order. Manufacturers also have curtailed production be cause of reduced demand as well as material scarcities. Shortages have been experienced even by war industries. Working forces in some lines have been reduced, but in total, employment in this district remained at a peak level in the latest period. Few layoffs of sizable propor tions were reported, and those workers who were fur loughed generally were rehired almost immediately at plants expanding war work. In many localities, the supply of skilled and semiskilled labor has been virtually exhaust ed. As a consequence, numerous concerns have revised employment standards, further simplified operating pro cedures, increased the practice of “ up grading” , and have hired women for work formerly done only by men. In some areas, the farm labor situation is fast reaching a critical stage; supply of harvest workers is much smaller than in previous years, though farm wages have risen rather sharply in a number of sections. Aggregate fourth district industrial payrolls increased slightly further in May. Adjustments in wage rates were reported in several instances, and although length of the work week was reduced in a few plants, overtime con tinued to be the rule rather than the exception. High individual earnings have not been reflected in retail trade volume to the same extent in recent weeks as earlier this year or in mid-1941 for a variety of reasons. In the four weeks ended June 20, dollar sales of reporting fourth district department stores wTere only fractionally larger than those of last year. Taking into account the general rise in prices during the past twelve months, physical volume of trade has declined below year ago levels. Some stability in living costs was indicated in a special survey made by the Bureau of Labor Statistics on June 2. In the first two weeks after the General Maximum Price Regulation became effective at the retail level, living costs in the three largest cities of the district declined approxi mately *4 one percent. This is the first decrease regis tered since October 1940. Food prices were slightly higher on June 2 than two weeks 'before; a 15 percent advance has been recorded during the past year. No. 6 FINANCIAL. Member Bank War Financing: Loans representing the financing of war activity accounted for 38 percent of the dollar volume of all commercial and in dustrial credit extended by member banks in all sections of the fourth district in the month ended May 15, 1942. A special survey was made recently covering loan activity in the month at 588 banks. The total volume of loans and renewals covered in the analysis was $148,104,000, but only $133,817,000 of such loans was classified as to purpose of the loan or renewal. The number of loans covered in the survey was 10,676, of which 2,037 represented defense loans and renewals. The average new war loan or renewal was approximately $25,000, whereas the average new loan or renewal for other than war purposes was slightly under $10,000. Despite this large dollar volume of new loans and renewals, total commercial and industrial loans of these re porting banks declined $3,000,000 in the month, indicat ing that total loan payments exceeded new loans and re newals. This was evident at both large and small sized banks. As might be expected, war financing was relatively more important in relation to total loan activity at reserve city banks than at country banks. At 32 reserve city banks (Cincinnati, Cleveland, Columbus, Pittsburgh, and Toledo), 42 percent of slightly more than $100,000,000 of new loans and renewals made in the month represented the financing of war activity. In addition, 1.6 percent of all loans made NEW C O M M ER C IA L 588 FOURTH LO A N S AN D D ISTR ICT 8ANK5 A P R IL 16-M AY 15,1942 100% WAR LOANS NON-WAR % D 100 LOANS 55 U N C LA S SIF IE D RESERVE C lT Y B A N K S RENEW ALS 2 THE MONTHLY BUSINESS REVIEW were classified as representing both war and nonwar op erations, while 1.3 percent of total loans were not classi fied. At 556 reporting country banks, whose total new loans and renewals in the period amounted to $47,000,000, 28 percent were classified as war loans, 68 percent for ordinary commercial and industrial purposes, and 4 per cent were either not classified or considered as being for both war and ordinary purposes. These figures, together with those covering all reporting banks, are shown in the accompanying chart. In addition to the above classification, many banks felt that the financing of such activities as food processing and marketing, which are supplying military as well as civil ian requirements to a greater degree than is normally the case, should be considered in part as war financing. Pro vision in the survey was not made for such a breakdown. The accompanying table shows the dollar amount of new loans and renewals made by these reporting banks to thir teen major industrial or trade groups, and the percent of new and renewed loans in each group reported as repre senting war financing. In those lines such as metal prod ucts, chemicals, construction, and metal mining, where war preparations have assumed a major position, war financing has assumed a dominant role, both in new loans made and renewals of outstanding loans. The great bulk, 98 percent, of commercial and industrial loans and renewals covered by this survey mature in one year or less. Only one percent of the new loans for war purposes, and no renewals, which are similarly classified, extend over more than a year. Additional information obtained from this survey will appear in the next REVIEW . INDUSTRIAL AND COMMERCIAL LOANS AND RENEWALS APRIL 16-M A Y 15, 1942 588 FOURTH DISTRICT MEMBER BANKS War Loan Re New War Total newals Loans War as % of Total New as % of Total Loan Total New War Total Re Re Re Loans Loans Loans newals newals newals Trade ........................... 10,632 1,189 44 6,358 Finance ...................... 217 1,208 Service ........................ 683 509 Metal Mining ........... M etal Products . . . . 16,604 15,664 194 1,139 Petroleum .................. 767 1,376 Chemicals .................. 2,517 1,062 Textiles ...................... 234 Food ............................. 4,931 Other M anufacturing 6,487 3,306 4,712 1,136 Utilities ...................... Construction ............. 9,179 7,557 A ll Other .................. 2,365 550 Total' ...................... ' Includes some 69,389 32,429 11 1 20 75 94 17 56 42 5 51 24 82 23 17,760 5,680 1,609 1,322 11,141 1,208 684 2,957 4,630 5,466 721 5,263 5,446 815 21 79 1,232 9,966 107 452 812 134 2,539 34 2,501 185 5 93 89 9 66 27 3 46 5 48 3 5 47 64,428 18,887 29 unclassified loans. Bank Consumer instalment debt to leading Instalment banks in the fourth district which have Credit been reporting such data recently was reduced 4.3 percent in May. This followed a contraction of 8.9 percent in April. The accompanying chart shows fluc tuations in total consumer instalment loans, cash instal ment loans, credit extended either direct or through the purchase of instalment paper representing the sale of mer chandise, and all other instalment loans made by banks reporting such information. Since December, the greatest liquidation in consumer instalment bank credit occurred in that debt arising out of the sale of merchandise to consumers. The contraction has been 30 percent. Personal cash loans made by these reporting banks were down only three percent as of May 31, compared with the end of last year. In March per sonal cash loans actually increased, reflecting in part the borrowing of funds for tax purposes. Compared with Sep tember, the month in which Regulation W, pertaining to the extension of instalment credit, became effective, per sonal instalment cash loans have dropped about ten per cent, but in the eight-month interval total consumer in stalment debt to leading banks in this district was reduced 25 percent. CONSUMER INSTALM ENT LOANS 30 Banks— Fourth District (December 1941=100) Retail Loans Personal & Paper Total Cash Loans Purchased A ll Other 30, 1 9 4 1 ... 106.3 106.0 100.0 io a o 100.0 31, 1 9 4 1 ... 100.0 93.3 88.5 28, 1 9 4 2 ... 91.8 97.8 93.3 85.6 107.4 31, 1 9 4 2 ... 92.6 90.4 74.3 84.4 30, 1 9 4 2 ... 101.6 89.2 70.4 31, 1 9 4 2 ... 96.9 80.8 Bond Through June 27, sales of war bonds of series E, F, and G by financial institu tions and through payroll allotment pro grams operating in the fourth district failed to equal the rate reported in May. With June quotas for the entire country one-third higher than those of May, it would ap pear that the June goal was not being attained locally. Sales of war savings bonds in June up to the 27th of the month totaled $39,530,000, compared with $44,814,000 in all of May. Sales Reserve Bank credit There was some increase in bills dis counted for member banks in June over the May level, but the total amount in volved was still only nominal. Industrial advances also rose by approximately $50,000 but combined discounts and advances totaled only $334,000 on June 17; a year ago they were $479,000. In conjunction with the System's open market operations this bank's holdings of notes, certificates and bills increased $14,000,000 in the four weeks ended June 17. Short-term securities have been acquired under the System's recently established policy of buying all bills offered at a fixed rate of interest, percent. Total security holdings on June 17 were $44,000,000 larger than a year ago. There was an increase of $28,000,000 in circulation of this bank’s Federal reserve notes in the four latest weeks. This was somewhat greater than the increase experienced THE MONTHLY BUSINESS REVIEW in earlier months of the year. Since January 1 note cir culation has expanded over $100,000,000. Reserve deposits of member banks increased in recent weeks, in part as a result of the contraction in U. S. Treas ury deposits to the lowest level of the year. Excess re serves dropped in the last half of May, chiefly because of an increase in required reserves against expanding de posits, although money in circulation also was a factor. Member Bank Credit Total loans made by weekly reporting banks in leading cities of the district dropped in mid-June to the lowest level in nearly a year. Commercial and industrial loans, although fluctuating somewhat in early June, increased around mid month to the level evident during May. Other loans, ex cept those to brokers and on securities, were reduced slightly in the first three weeks of June. Bank holdings of Government securities increased by more than two per cent in the four weeks ended June 17, with Treasury bills and notes accounting for the rise. A year ago, local re porting banks held only $8,000,000 of Treasury bills; on the latest date they had $52,000,000. The increase in the total supply of bills and the higher rates on recent issues, have contributed to the greater distribution of Treasury bills among fourth district banks. Demand deposits of these large banks fluctuated some what in early June, rising to a near high level of $2,114,000,000 in the second week, a gain of $300,000,000 since the beginning of the year. Time deposits continued to con tract moderately. New Member Banks The Bank of Mount Eaton Company, Mount Eaton, Ohio. The Peoples Banking Company of Lewisburg, Lewisburg, Ohio. The Twin Valley Bank, West Alexandria, Ohio. The First State Bank of West Manchester, West Man chester, Ohio. MANUFACTURING, MINING Steel mills in the fourth district, as elsewhere throughout the country, con tinued to operate at a high rate during May and the first part of June. National ingot production for May was 7,387,000 net tons, the second largest for any month in history, being only 6,000 tons under the record total reported in March. Scrap has been moving to melters in somewhat greater quantities recently, so that the necessity for doing main tenance work has become the principal factor determin ing operating rates. Steel mills used 4,857,000 gross tons of scrap metal during May, an all-time record amount. Despite this peak consumption, many steel plants were able to accumulate some scrap inventories, though not so much as at that time in previous years. The number of new orders received by steel producers declined during May and early June from the large vol ume of previous months, but the total tonnage booked con tinued to exceed output and shipments. Greatest demand was still for heavy items, such as semifinished steel for lend-lease purposes and plates. In May, for the first time in history, more than 1,000,000 tons of steel plates were made. Pig iron production figures are no longer available for publication, but judged by iron ore consumption, May out Iron and Steel 3 put was about the largest in history. Blast furnaces de pending principally upon supplies of Lake Superior ore used 7,240,000 gross tons during May. This is an all-time record tonnage that compares with 7,007,000 tons in April and 6,232,000 tons a year ago. With one exception all of the 298 vessels in the Ameri can Great Lakes ore fleet were in service on June 15; one former automobile carrier was being converted to the ore trade. Last year there were 292 American boats carrying ore; the six freighters added to the fleet this year are con verted automobile and grain carriers. During May, American ore carriers, aided by 25 boats of Canadian registry, loaded 12,677,000 tons of iron ore at upper Great Lakes' docks, a new record tonnage which exceeds the previous high of August 1941 by approximately 1.200.000 tons. Although foggy weather hampered lake navigation early in the month, the rate of ore receipts at Lake Erie docks during the first three weeks in June was slightly higher than that of May. Ore inventories on unloading docks and at consuming furnaces on June 1 totaled 25,199,000 tons, roughly 3,250.000 tons more than on the same date last year. Net additions to stocks during May approximated 5,000,000 tons. Manufacturing: Industries Activity in fourth district manufacturing industries has become more and more dependent on the extent to which plant facilities are being utilized in the war effort. Produc ers of items required for either primary or secondary war purposes have been operating at practical capacity; man ufacturers of civilian goods have curtailed output not only because of Governmental restrictions, 'but also because of a slackening in demand for some articles. A number cf concerns, even those doing war work, have had difficulty in obtaining raw materials, and that experience was more widespread in May and the forepart of June than earlier in the year. Machinery production was increased further to new high levels in May. Working forces were again augmented, and some new production facilities in this district were put in operation. Owing to changes in requirements, cus tomers canceled some of the orders placed in March for extended deliveries. Machine tool company bookings in that month reportedly were the largest in history and re sulted from a Government statement advising plants plan ning to enlarge manufacturing facilities to arrange for equipment. Material supply has become a problem of sev eral machinery companies. Federal allocations of pig iron reportedly have worked out satisfactorily in the foundry trade. Grey iron foundries generally have produced and shipped in about the same volume as new business has been received, but demand for steel castings has exceeded aggregate shop capacity. As a consequence, order backlogs have increased and de liveries are delayed. Fourth district concerns formerly manufacturing auto mobile parts and subassemblies have largely converted to war work. Operations were at a high rate in May and early June, though a number of companies were experienc ing difficulty in securing materials. Production of both window and plate glass declined from April to May. Less plate glass was polished by com mercial producers during May than in any other month for four years; output totaled 4,310,000 square feet. Dur THE MONTHLY BUSINESS REVIEW 4 ing May, 1,557,000 boxes of flat drawn glass were made, five percent less than in April, but 21 percent more than a year ago. The recent decrease was attributable primarily to a slackening in demand from the construction industry, most importantly from millwork shops making glazed door and window sash. A labor dispute temporarily closed some departments in three fourth district window glass fac tories early in June. Glass container plants have contin ued to operate in excess of rated capacity foj some time by extending length of the work week. Material supply has not been a particular problem in the glass industry, but labor turnover has been. Considerable numbers of for mer glass workers have gone into higher paying war jobs. A similar experience has been reported in the ceramics industry. New order volume for dinnerware declined mark edly from the middle of May to mid-June. Plants contin ued ‘to operate at virtual capacity, however, and the back log of unfilled orders was reported to be large enough to maintain this high rate until early July. Demand for both paper and paperboard continued to de cline during May and the first part of June, with the re sult that operations at manufacturing plants were reduced further. According to the American Paper and Pulp A s sociation, paper mills in mid-June were producing at the lowest rate in more than a year. Activity has been cur tailed most in book paper divisions, owing to a decrease in magazine and other advertising by business concerns generally. The tonnage of paperboard made in recent weeks has been the smallest for any period since early 1940. Most plants have reduced the work week from seven to five days. Fourth district carton manufacturers received little new business during the first weeks of June; the backlog of unfilled orders was decreasing rapidly, since operations continued at a high rate. Supplies of waste pa per, a material used in paper-making, have accumulated in large quantities at consuming mills and elsewhere, and prices have dropped sharply below the ceilings established by the Office of Price Administration. Most fourth district clothing manufacturers had not formally introduced fall merchandise by mid-June. Initial showings ordinarily have been held late in A pril; this year they have been delayed pending clarification of a situation where wage increases went into effect soon after the period selected as the base for maximum prices. Never theless, needlework shops have been producing men’s ready-to-wear, building up finished goods inventories ra ther than filling orders. Fall lines of shoes were opened to the retail trade in late April and by mid-June many salesmen had come off the road. Retailers this year are reported to have placed orders somewhat sooner than usual and in large volume. Fourth district factories started making fall merchandise earlier this year than heretofore. A considerable amount of so-called fill-in business also was received, with the re sult that output declined less than seasonally from April to May. In fact, May shoe production in this district was the largest for any similar month in the twenty years of record. Coal The market for bituminous coal contin ued strong during May and the first part of June, and the brisk demand natur ally was reflected in a high operating rate at fourth dis trict mines. May production, amounting to 19,185,000 net tons, was fractionally smaller than that of April, but the largest for any May since 1923. Industrial consumers in May and early June were add ing further to already large stockpiles. On May 1, the latest date for which complete inventory information is available, industrial concerns had more coal in storage than at any other time in the ten years of record. Com bined industrial and retail stocks, totaling 61,832,000 net tons, were the second largest for any date since late 1927. Aggregate inventories on January 1, 1942, in the middle of the heaviest consuming season, were about 1,000,000 tons greater. Several fourth district coal distributors in mid-June re ported that retail dealers were still very active in the mar ket, but some others experienced a decline in new business volume from this trade, which supplies domestic consum ers. It was generally considered that people who burn solid fuel for household heating purposes had by that time bought a large portion of their next winter’s requirements, and that many orders ordinarily received late in the sum mer or in the fall already had been filled. Demand for practically all grades of coal from upper Great Lakes’ sources was heavy in May and the forepart of June, and considerable tonnages were moving into Can ada, principally to munitions plants. During May, 6,251,000 net tons of cargo and fuel coal were loaded into bulk freighters at Lake Erie docks, compared with 5,445,000 tons in April and 4,870,000 tons a year ago, the month in which a protracted mine strike was settled. After June 1, the movement of coal over the Great Lakes wras some what restricted by Federal order. TRADE Department Despite the record volume of sales exStore perienced by fourth district department Inventories stores in the past year, merchandise man agers of practically every department have been able to accumulate a large volume of goods. Feeling that the source of supply for many kinds of merchandise might be cut off or severely limited, w’hile demand for goods of all kinds probably would increase as payrolls rose, there was a distinct ordering ahead in most lines. Department stores in this section on several occasions reported the volume of outstanding orders 250 percent larger than on the cor responding dates of the previous year. As these goods were received in the latter part of 1941 and the first four months of this year, the index if department store inventories ad vanced rapidly. At the present time total store inventories are more than twice as large as they were in January 1941. When allowance is made for seasonal differences, the in crease is 89 percent. Inventories are valued at selling price. They reflect the advance in costs that has occurred in the past year. While no exact index showing the extent to which department store prices have risen is available, it is generally reported that retail prices are about 20 per cent higher than they wrere a year ago. To that extent the increase in the value of stocks should be discounted if comparisons are made on a physical volume basis. At the end of May, reporting department stores in this area indicated the retail value of their inventories was 67 percent larger than on the corresponding date of 1941. One store reported inventories more than double a year THE MONTHLY BUSINESS REVIEW ago; ten stores reported increases of 75-100 percent; 22 stores reported stocks 50-75 percent larger than last year, and only 16 stores in this area reported increases of less than 50 p ercen t. In addition, these same stores reported outstanding orders 35 percent larger than at the end of May 1941. Indexes of total inventories of reporting department 5 stores and leading departments are shown in the accom panying charts and table. Stocks as of January 31, 1941, the end of the department store fiscal year, are taken as 100. Indexes of total inventories, unadjusted and season ally adjusted, are available monthly. Departmental inven tories are available only quarterly. Figures are for an iden tical group of stores, although the number varies consid erably in each department. The largest number reporting for any one department is 51, with the average number reporting 37. In the departmental inventory figures no at tempt is made to adjust the figures for seasonal changes. Inventories of piece goods at the end of April were 72 percent larger than a year ago. They were double what they were at the beginning of the 1941 department store year, but apparently there is a seasonal rise in piece goods inventories from January to April. Cotton wash goods have increased more proportionately than have inventories of silks, velvets, and woolen dress goods. In women’s ready-to-wear accessories, inventories were 54 percent larger than a year ago, and up 93 percent from January 1941. The increase from January 1942 to April 1942 was much larger than was evident in the same pe riod of the previous year. Inventories of hosiery, despite the fact that silk has not been available for processing for nearly a year, were 117 percent larger than a year ago and 288 percent as large as in January 1941. Other wo men’s accessory items increased from 40 to 167 percent in the fifteen months ended with April 1942. In the women’s and misses’ apparel departments, where style is an important factor working against the accumu lation of large inventories, sizable gains, nevertheless, were shown. Total women’s apparel stocks were up 53 percent from a year ago with blouses, skirts, and sportswear nearly double, but fur inventories were up only 33 percent. In men’s and boys’ clothing departments increases in inven tories since January 1941 have ranged between 67 and 111 percent, with men’s furnishings showing a somewhat larger increase than men’s clothing. Inventories of boys’ wear were more than double. In the house furnishings depart ments, many of which have been affected by the cutting off of strategic metals, April inventories were still double what they were in January 1941. Inventories of major household appliances, such as stoves, refrigerators, wash ers, etc., were up 139 percent in the fifteen-month period, and were 69 percent larger than at the end of April of that year. Smallest increases in the housewares departments were in furniture and china and glassware, and even here gains of 57 percent were reported in the fifteen-month period. Basement departments of reporting department stores showed larger inventory increases than did the entire store. Where such figures are available, inventories were 125 percent larger than at the beginning of 1941, with inven tories of men’s and boys’ clothing up 140 percent and house furnishings 131 percent. This situation may result from the fact that there has definitely been a “ trading up” at department stores, with larger sales being reported in the upstairs departments or higher-priced lines. Department store managers, however, realizing that soon many of these articles will disappear from shelves, have continued to purchase for all departments alike, feeling that later a demand for this merchandise will also develop. 6 THE MONTHLY BUSINESS REVIEW IN D E X NUMBERS OF DEPARTM ENT STORE (January 31, 1941=100) April October DEPARTM ENT 1941 1941 ENTIRE STORE— TOTAL .................... 122 178 177 PIECE GOODS— TOTAL ...................... 115 Silks, Velvets, Woolen Goods......... 110 137 Cotton W ash Goods ............................. 124 135 SMALL W AR E S: Laces, Trimmings, etc........................ 115 147 Notions ....................................................... 129 157 188 Toilet Articles, Drugs ........................ 124 Silverware and Jewelry .................... 125 181 Art Needlework, Art Goods............. 117 136 Books, Stationery ............... ................. 117 184 R E A D Y-T O -W E A R ACCESSORIES— TOTAL ....................................................... 125 188 119 199 Neckwear and Scarfs ........................ Handkerchiefs ........................................ 145 275 Millinery ................................................... 145 143 Gloves ....................................................... 115 195 Corsets and Brassieres ...................... 122 149 Hosiery (Wom en’s and Children’s) 132 229 Women’s Underwear ........................... 125 222 Infants’ W ear ........................................ 119 201 Leather Goods (sm all) ...................... 129 235 Shoes (Wom en’s and Children’s ) . . . 124 141 WOM EN’S AND MISSES’ R E AD Y-T O W E A R — TOTAL ................................... 109 188 Coats and Suits (Wom en’s and Qf> Dresses (Wom en’s arid Misses’ ) . . . 125 140 Blouses, Skirts, Knitgoods, Sports wear ....................................................... 125 174 120 222 Juniors’ and Girls’ W ear ............... Aprons, House Dresses, and Uni forms .......................................................... 130 152 Furs ............................................................ 81 187 TOTAL W OM EN’S W EA R IN G A P 119 189 PAREL ....................................................... MEN’S AND BOYS’ W E A R — TOTAL 126 183 Men’s Clothing ...................................... 130 168 Men’s Furnishings (incl. hats & caps) ..................................................... 124 202 Boys’ Clothing and Furnishings. . . 126 192 Men’s and Boys’ Shoes...................... 121 153 121 161 HOUSE FURNISHINGS— T O TA L........ Furniture, Beds, M attresses, Springs 102 136 Domestic Floor Coverings ............... 115 145 Draperies, Curtains, Upholstery. . .' 134 156 Lamps, Shades ...................................... 124 186 121 151 China, Glassware ................................. M ajor Household Appliances........... 141 223 Housewares ............................................ 138 193 Domestics, Blankets, L inens............. 131 168 MISCELLANEOUS: Toys and G a m e s ................................... 108 331 I ll 196 Sport Goods ............................................ Luggage ................................................... 129 218 119 198 BASEMENT STORE— TOTAL ........... Women’ s, Girls’ Apparel and Acces sories ..................................................... 113 209 Men’s and Boys’ Clothing and Fur nishings ................................................. 131 240 House F u rn ish in g s............................... 115 166 Piece Goods.............................................. 116 141 Shoes ......................................................... 132 162 R e ta il V ariou s factors have ment store haps G eneral M a x im u m sales in STOCKS January April 1942 1942 140 200 137 200 133 196 161 233 119 133 141 134 121 132 146 210 230 191 170 180 129 141 166 104 109 114 170 125 136 125 120 193 185 267 149 140 203 288 198 197 213 153 119 167 11^ 108 154 152 135 126 248 191 129 116 193 105 125 121 117 183 190 164 127 128 114 154 148 145 133 158 128 258 194 136 211 205 167 199 157 203 190 245 157 239 269 224 148 169 163 145 249 222 249 225 145 230 147 154 137 131 241 231 212 196 influenced P rice Regulation 18 w hich became at the highest level prevailing in this T h is one year M u ch Federal incentive to buy order has the effec and established ceiling prices on m ost com m odities handled by department rarily, P e r one of the m ost important is tive at the retail level on M a y M arch . depart recent w eeks. stores each individual store in removed, at least tem po consumers had last year and earlier ahead purchasing also in anticipation was done of higher by individuals prices. expecting certain articles to be scarce or of poorer quality. T h e quan tities of goods bought in advance sons has been another factor. o f needs for these rea W hen com parisons w ith a year a g o are made it should be remembered that trade w as expanding at that time em ploym ent and rapidly under the risin g stimulus of increasing payrolls. F o r som e of the reasons listed above, fourth district de partment stores experienced a less than in sales from A p r il to M ay, index dropped 16 points to 105 erage. It w as 103 in M a y seasonal increase and the seasonally adjusted percent of the 1 92 3 -2 5 av 1941. T h e change from a year ago was narrow chiefly because of a sizable decline in the dollar volume of departments handling clothing and housefurnishings, types of merchandise which consumers bought in large quantities in previous months. Sales of piece goods were 23 percent greater this May than last. Experience in other lines varied, with some departments showing slight gains and others registering smail losses. Reporting apparel shops in this district sold five per cent less merchandise, on a dollar basis, during May than a year ago. As in the case of department stores, these re tail outlets have continued to increase inventories. Stocks on June 1, 1942 were 61 percent larger than those of June 1, 1941; outstanding orders were up 43 percent. During May, apparel stores collected 36 percent of accounts re ceivable at the beginning of the month, a slightly greater proportion than in either April or last May. Collections in the latest month w^ere 17 percent greater than those of a year ago. Dollar sales of individual stores in reporting fourth dis trict grocery chains increased six percent from April to May, in which month they were 26 percent larger than those of a year ago. For chain drug companies, also on a unit store basis, the increases were four percent and twelve percent, respectively. Wholesale May sales of 200 fourth district whole sale concerns reporting to the Bureau of the Census were six percent larger than those of a year ago. This year-to-year improvement, which is the narrowest registered in any month since late 1940, reflects expanding activity in May last year more than the decline in volume in the latest month. Unlike department stores and apparel shops, wholesale merchants generally reduced inventories slightly during May; stocks on June 1, however, still averaged 13 percent greater than those a year earlier. Collections were 18 percent larger this May than last. CONSTRUCTION The fourth district war construction program was inten sified in May. A further sharp expansion in nonresidential building, chiefly of new manufacturing plants, more than nullified a substantial decline in residential activity. A g gregate awards for the period, totaling $62,220,000, were the third largest for any month since late 1929, being ex ceeded by relatively narrow margins in May and July of last year. In both of those months, large amounts of resi dential building w7ere contracted for, principally by private capital. Two-thirds of all contracts awarded in Ohio, Kentucky, northern West Virginia, and western Pennsylvania during the latest month were classified as defense construction by the F. W. Dodge Corporation. Another 15 percent were other public projects, including roads and municipal serv ices. The remaining 18 percent were private building, most of wrhich presumably w^ere essential to the war effort or necessary for public health and safety. Last year defense construction in this section represented only 15 percent of the month’s total. Other publicly-financed work ac counted for an additional 31 percent, and private building for the balance, or 54 percent. Fourth district lumber and building supplies distrib utors experienced a further sharp decline in new order THE MONTHLY BUSINESS REVIEW volume from private building sources early in June; de mand was primarily from Government projects for com mon construction lumber and from industrial consumers for crating materials. Retail yards were reported to be buying very little. Some concern was expressed about lum ber inventories which were being depleted because under terms of a Federal directive issued early in May shipments of construction lumber from the larger producing mills were restricted to deliveries for use by the Army, Navy, and Maritime Commission. Wholesale and Retail Trade (1942 compared with 1941) Percentage Increase or Decrease SALES SALES ST O C K S M ay first 5 M ay 1942 months 1942 D E P A R T M E N T STOR ES (96) Akron........................................................................... + 3 +26 +78 Canton........................................................................ — 12 +19 a Cincinnati.................................................................. — 9 +15 +104 Cleveland................................................................... — 1 +23 +69 Columbus................................................................... — 3 +16 +72 Erie............................................................................... +10 +27 +65 Pittsburgh.................................................................. — 7 +16 +72 Springfield.................................................................. — 11 +10 a Toledo......................................................................... — 4 +18 +69 W heeling.................................................................... — 6 +14 +39 Youngstown.............................................................. — 16 + 9 a Other Cities.............................................................. — 18 + 9 +81 District........................................................................ — 6 +18 +75 W E A R IN G A P P A R E L (16) Canton........................................................................ — 1 +24 +71 Cincinnati.................................................................. — 21 +15 +45 Cleveland................................................................... — 2 +24 +50 Pittsburgh.................................................................. — 8 +20 +77 Other Cities.............................................................. + 6 +22 +72 District........................................................................ — 5 +21 +61 C H A IN STO R E S* Drugs— District (5 ).............................................. +12 +16 Groceries— District (4 )........................................ +26 +35 W H OLESALE T R A D E ** Automotive Supplies (1 0 ) ................................. — 1 +14 +22 +11 +21 +38 Beer ( 5 ).................... ................................................ Clothing and Furnishings ( 3 ) ......................... -0 +12 a Confectionery ( 5 ) ................................................... +25 +28 + 3 Drugs and Drug Sundries ( 6 ) ........................ + 7 +13 +25 Dry Goods ( 7 ) ........................................................ +11 +34 +25 Electrical Goods (1 3 ).......................................... — 12 + 8 — 18 Fresh Fruits and Vegetables ( 6 ) ................... + 3 +14 +43 Furniture & House Furnishings ( 3 ) ............ — 47 a a Grocery Group ( 4 5 ) ............................................. + 2 +19 +27 Total Hardware Group (3 6 )............................ +1.8 +32 +10 General Hardware ( 1 0 ) ................................. + 3 +25 +14 Industrial Supplies (1 4 )................................. +49 +45 + 3 Plumbing & Heating Supplies (1 2 ) ............ — 9 +17 — 12 Jewelry ( 4 ) ............................................................... +10 a +18 Lumber and Building Materials (3 ).............. +11 -0 — a Machinery, Equip. & Sup. (exc. Elect.) (5). . +18 +27 — 17 Meats and M eat Products ( 6 ) ....................... +24 +31 +14 Metals ( 3 ) ................................................................. — 17 — 16 a Paints and Varnishes ( 5 ) .................................... — 24 +11 +23 Paper and its Products ( 5 ).............................. — 3 +29 a Tobacco and its Products ( 1 4 ) ............ .. . . . + 5 +13 -0 Miscellaneous (1 6 )................................................. +14 +21 -0 District— All Wholesale Trade (2 0 0 ) .......... + 6 +19 +13 * Per individual unit operated. * * Wholesale data compiled by U. S. Department of Commerce, Bureau of the Census. a N ot available. Figures in parentheses indicate number offirms reporting sales. AGRICULTURE Weather conditions affecting fourth district agriculture thus far in the growing season have been markedly differ ent this year than last. A year ago, the spring was un usually dry and farm field work progressed rapidly. In most localities this year it has been cool and wet. A con siderable amount of corn and soybean planting had to be delayed because the ground was too wet to work. Early seeded corn fields, however, were reported to be compara tively weed free early in June, despite the fact that rela tively little cultivating had been done. Excellent stands of tobacco were said to have been obtained in the Kentucky burley belt. The rains in May were of marked benefit to small grains, hay crops, and pastures. Condition of forage crops and grazing lots at the time of the June 1 Crop Report was sharply above average in all sections of the district. Pas tures were furnishing excellent feed for dairy cattle, with the result that milk production per cow kept by crop re porters in the States, parts of which comprise this district, while increasing somewhat less than seasonally from May 1 to June 1, was the best for the later date in recent years. Haymaking has been hindered in a number of localities by rainy weather. Fourth District Business Statistics (000 omitted) Fourth District Unless M ay % change Jan.-M ay Otherwise Specified 1942 from 1941 1942 Bank Debits— 24 cities...................33,558,000 +14 17,196,000 Savings Deposits— end of month: — 3 40 banks O. and W . Pa................ $ 770,847 Life Insurance Sales: Ohio and Pa.....................................$ 62,830 — 28 436,022 Retail Sales: Dept. Stores— 96 firms................$ 32,171 — 6 166,024 Wearing Apparel— 16 f i r m s ....$ 1,155 — 5 6,599 Building Contracts— T otal............$ 62,220 — 2 227,761 ” — Residential. $ 13,333 — 47 83,561 Commercial Failures— Liabilities? 512 — 3 2,928 — N u m b e r ... 53 — 18 241 Production: Steel Ingot— U. S........... net tons 7,387 + 5 35,548 Bituminous Coal, O., W . Pa., E. K y ...................................net tons 19,185 +11 91,339 Cement— O., W . Pa., W . Va. bbls. 1,544 +11 5,609 Elec. Power, O., Pa., K y .............. ...............................Thous. k.w.h. 2,496a +21 9,819b Petroleum— O., Pa., K y .. ..b b ls . 2,255a + 9 8,496b Shoes^..........................#............... pairs c + 1 c Bituminous Coal Shipments: L. E. Ports..........................net tons 6,521 +34 12,957 a April b January-April c confidential M ay 1941 115 45 12 91 111 92 64 77 130 91 115 133 147 96 117 246 112 116 M ay 1940 90 54 25 84 94 91 52 71 82 71 94 71 94 78 94 215 124 83 M ay 1939 77 52 14 78 89 92 45 66 73 66 a 65 68 33 79 182 113 96 May 1938 72 54 38 69 79 87 38 64 69 62 90 44 48 45 72 169 119 80 % change from 1941 +17 + 4 +18 +21 +18 + 3 -—40 — 26 + 4 +33 +15 +14 + 6 — 6 +75 Debits to Individual Accounts Fourth District Business Indexes (1923-25 = 1 0 0 )) M ay 1942 131 Bank debits (24 cities)...................................... Commercial Failures (N u m ber)..................... 36 ” ” (Liabilities)................... 12 Sales— Life Insurance (O. and P a .).............. 65 ” — Department Stores (48 firms)............ 113 ” — Wholesale Drugs (6 firms)................ 98 ” — ” Dry Goods (7 firm s). . 71 ” ” Groceries (45 firms). . 79 ” — ” Hardware (36 firms) . . 153 ” — ” All (94 firms)................ 101 ” — Chain Drugs (4 firm s)*...................... 128 'uilding Contracts (T otal)................................ Buil 130 77 ” ” (Residential)..................... 106 Production— Coal (O., W . Pa., E. K y .) ......... 128 — Cement (O., W . Pa., E. K y .) . . 297 ” — Elec. Power (O., Pa., K y .)* * . . . 122 ” — Petroleum (O., Pa., K y .)* * . . . . ” — Shoes................................................. 117 * Per individual unit operated. ** April, a Not available. 7 Canton.............. Cincinnati. . . . Greensburg. . . Hom estead.. . . Middletown. . . Oil C ity............ Springfield. . , . Steubenville. , . Toledo............... Youngstown. . (Thousands of Dollars) % change from Jan.-May 1941 1942 M ay 1942 557,435 + 2 5 .6 119,959 65,609 12,924 — 3 .8 + 8 .9 298,336 60,493 + 1 2 .9 2,449,588 487,041 944,924 + 8 .4 4,490,281 271,286 + 2 2 .4 1,195,606 105,780 530,322 + 8 .4 + 15 .8 227,965 47,443 23,217 4,411 + 3 .6 10,064 + 1 4 .0 51,970 87,116 18,016 + 3 .7 4,454 — 5 .5 23,099 23,782 + 1 3 .0 142,807 18,286 + 3 .3 100,221 7,085 — 1 .7 34,106 19,041 + 1 3 .3 91,542 + 18.1 66,462 12,989 1,039,153 + 2 0 .9 5,040,660 + 1 3 .7 13,690 67,427 24,871 + 8 .0 120,065 11,587 — 5 .2 57,980 + 1 6 .9 944,655 193,023 18,666 + 1 5 .0 90,903 32,067 — 9 .2 154,825 70,410 + 4 .1 349,055 10,470 — 2 .2 54,414 + 14.1 3,581,915 17,315,666 % Jan.-May 1941 439,594 58,457 251,972 2,016,327 3,771,535 1,020,124 450,065 179,382 18,991 42,354 71,277 19,715 129,306 85,112 30,893 73,221 51,119 4,459,888 55,693 105,814 54,484 765,306 75,780 163,188 306,775 49,052 14,745,424 ■ change from 1941 + 2 6 .8 + 1 2.2 + 18.4 + 2 1 .5 + 19.1 + 1 7.2 + 1 7.8 + 2 7 .1 + 2 2 .3 + 2 2 .7 + 2 2 .2 + 1 7 .2 + 10 .4 + 1 7.8 + 1 0 .4 + 2 5 .0 + 3 0 .0 + 1 3 .0 + 2 1 .1 + 13.5 + 6 .4 + 2 3 .4 + 2 0 .0 — 5.1 + 13.8 + 10.9 + 17.4 8 THE MONTHLY BUSINESS REVIEW Summary of National Business Conditions By the Board of Governors of the Federal Reserve System INDUSTRIAL Industrial activity o f June. Com m odity M ay when the general trade declined further o f June. PRODUCTION continued to advance in M ay and the first h alf prices showed little change after the middle o f m axim um price regulation went into effect. Retail in M ay but increased som ew hat in the first h alf Production Federal Reserve monthly index of physical volume of production, adjusted for sea sonal variation, 1935-39 average — 100. Latest figures shown are for May 1943. DEPARTMENT STORE SALES AND STOCKS Federal Reserve monthly indexes of value of sales and stocks, adjusted for seasonal variation, 1923-25 average = 100. Latest fig ures shown are for May 1942. Volum e o f industrial production increased in M ay and the B oard’s seasonally adjusted index advanced to 176 per cent o f the 1935-39 average, as com pared with 173 in April and 171 during the first quarter o f this year. Output o f m anufactured products continued to increase, reflecting chiefly further grow th in production o f w ar m aterials, while m ineral p ro duction showed a seasonal rise. The largest increases in May, as in other recent months w ere in the m achinery and transportation equipment industries which are now m aking products chiefly fo r m ilitary purposes. The am ount o f copper smelted rose sharply and output o f chem icals continued to advance. A c tivity in the autom obile industry, which since January had been retarded during the conversion o f plants fo r arm am ent production, showed an increase in May. Steel production was maintained at about 98 per cent o f capacity in M ay and the first h alf o f June. Lum ber production increased season ally and activity at furniture factories, which usually declines at this tim e o f year, was sustained at a high rate. In industries m anufacturing textiles and food products, output continued large in May. Gasoline p ro duction declined further, however, reflecting the effects o f transporta tion difficulties. There was a further m arked decrease in paperboard production which, according to trade reports, reflected a slackening in demand. Coal production was sustained at a high rate in M ay and output o f crude petroleum increased somewhat, follow in g considerable declines in M arch and April. Copper production and iron ore shipments rose sharply to new record levels. Value o f construction contract awards increased sharply in May, follow in g a decline in the previous month, and was close to the record high level reached last August, according to figures o f the F. W . D od ge C orporation. Awards fo r publicly financed wiork increased in M ay and, as in other recent months, constituted around three quarters o f the total. A w ards fo r residential building continued to decline. Distribution Retail trade declined further in May. D epartm ent store sales were about 7 per cent sm aller than in A pril and sales by m ail-order houses showed a sim ilar decrease. In the first h a lf o f June departm ent sales increased somewhat. C arloadings o f revenue freigh t increased in M ay b y about the usual seasonal amount. There was a further substantial decline in the num ber o f cars loaded with m erchandise in less than carload lots, reflecting the effect o f Federal orders raising the minim um w eights fo r such loadings. Increases were reported in shipments o f m ost other classes o f freight, particularly coal, ore, and m iscellaneous freight. MEMBER BANKS IN 101 LEADING CITIES Commodity Prices Wednesday figures. Commercial loans, which include industrial and agricultural loans, represent prior to May 19, 1937 socalled “Other loans” as then reported. Latest figures shown are for June 10, 1942. Bank Credit MEMBER BANK RESERVES AND RELATED ITEMS FACTORS SUPPLY!^ RtSF.: — T — ! / r/ ■ FACTORS USING PESERV --------h VEVBER BANK RESERVE BALANCES 7 ' J ^ \y . CIRCULATION^/*^ TRFASURY CASH AND DEPOSITS TREASURYr CURRENCY ---- sJ_____ri-- ^ RtStHVt BANK CRtDIT ....... 1 1 DEPOSITS .. . _ I. .... ..i........ Wednesday figures. Latest figures shown are for June 10, 1942. Prices o f m ost com m odities both at w holesale and retail showed little change after the general m axim um price regulation w ent into effect around the middle o f May. Declines occurred in prices o f cotton and som e other agricultural com m odities, and prices o f som e industrial com modities were reduced to con form with the general order that prices should not exceed the highest levels reached in March. A ction w as taken to exem pt m ost m ilitary products fro m the general regulation and to allow fo r special treatm ent o f w om en’s coats and dresses and a few other nonm ilitary items. D uring M ay and the first h a lf o f June, the Federal R eserve Banks purchased about 200 million dollars o f United States G overnm ent Securi ties. Additions to m em ber banks’ reserves fro m this source, how ever, were offset by continued withdrawals o f currency by the public. E xcess re serves fluctuated around 2,700 m illion dollars during the six-week period. R eporting m em ber bank holdings o f United States G overnm ent securi ties increased by nearly a billion dollars during the period. Two-thirds o f the increase cam e in the week ending M ay 20 with delivery o f new T reasury 2 per cent 1949-51 bonds, and the balance represented m ainly increased bill holdings. Loans declined som ew hat in the period. Adjusted demand deposits continued to increase, while United State G overnm ent deposits w ere reduced. United States Government Security Prices Prices o f taxable United States G overnm ent bonds, which declined by about H point at the tim e o f the early M ay financing, subsequently re gained that loss and during the first h a lf o f June rem ained steady.
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