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The Monthly BUSINESS REVIEW Covering business and industrial conditions in the Fourth Extend Reserve District FEDERAL RESERVE BANK of CLEVELAND D.C.Wills, Chairman o f the Board (COMPILED FEBRUARY 15. 1920) VOL. 2 CLEVELAND. OHIO, MARCH 1, 1920 HE backfire of deliberate restricted production takes on the action of a boomerang and strikes its restrictor between the eyes. The American working man is “ fed up” with the fallacy that high pay is the only force that enters into the cost of living; he has begun to realize that production is a matter that is vital to him, and with this awakening one of the greatest problems with which the American business man has been con fronted during the war and post-war period is slowly but surely passing into the discard. The fundamental law of supply and demand, which may be temporarily submerged or suppressed by reason of some unusual condition, will inevitably rise to the surface and dominate our economic life. This fact we must all recognize, whether we wish to or not. And we believe we see in conditions today evidence that our people realize relief from our present high cost situation may be found only in a return to normal production. The quicker the re turn, the sooner will relief be had. We are glad to say that under-production cannot be laid at the door of organized labor alone. The practice is too general. Organized labor constitutes but about 15 per cent of our national productive strength, while under-production exists today in practically all lines of human endeavor. Both skilled and unskilled labor are affected and society in gen eral shares its evil consequences. It is an indisputable fact that there exists today a world-wide shortage of goods. It is equally true that this shortage must be met. Whether this is done by our own people or by some of the foreign countries depends upon the ability of the American working man to see the danger to himself in the present situation and the quickness with which he takes the necessary steps to avert it. Reduced pro duction here means nothing but stimulated effort elsewhere. As European countries increase their out put (and let us not deceive ourselves as to their ability to do so) our workmen must then compete with low-paid foreign labor in the markets of the world, including our own. Production bears a definite relation to price. Where production equals consumption, normal prices prevail. When production cannot equal the demand, prices advance out of proportion to the shortage. T No. 2 It has been demonstrated that a 9 per cent reduction in output has resulted in a 68 per cent advance in the price of a certain commodity. And therein lies the primary cause of the exorbitant prices of today. That profiteering exists in some lines no one ques tions. It has always been with us, though the oppor tunity to practice it has never before been so great. Probably profiteering does not exist to anything like the extent it is popularly supposed; but even should that be the case increased output is without ques tion the most effective weapon with which to fight it. It is a regrettable fact that in many plants organ ized efforts have been made among the workers to restrict output. That this is a boomerang is begin ning to be felt, and this strengthens our faith for the future. Just as soon as workers generally find that restricted production works in a circle, and eventually strikes directly at them, will the cost of living fall and a better feeling prevail in our in dustrial ranks. The worker who today is not producing his best is by his own action increasing the cost of living for himself as well as for others. He is forced to bid against others in the market for things of which there are not enough to go round. He forces others to pay high prices for the product of his labor, while other men by doing the same thing are forcing up prices on him. High wages are not a panacea for the ailment. They are ineyitably passed on to the consumer in higher pfices* and as our working people form the larger part of our population and consequently do most of the purchasing, they are shifting the burden of the high cost of living largely to An unfortunate feature is that those workers engaged in non-productive (although quite necessary) occupa tions are called upon to share the burden. To illus trate this point, let us take a concrete case. It has been proven by exhaustive research that on a general average labor constitutes two-thirds of the cost of manufacture, and every increase in wages calls for a raise in another industry. A hatter, say, is receiving $1 for certain work. He strikes for a 10 per cent raise and gets it. The manufacturer naturally puts this increased cost on his product. He was getting $1.10 for a hat and themselves. THE 2 MONTHLY BUSINESS raises his price to $1.21. The retailer, in turn, raises his figure, and the consumer pays $1.65 for what formerly cost him $1.50. The shoemaker finds that his wages will not permit him to pay $1.65 for a hat, so he demands a 10 per cent raise, and gets it. The clother, the shirtmaker, etc., following the shoe maker, get raises. The hatter finds that his 10 per cent increase is not enough to meet the extra cost of shoes, clothing, etc., so he asks for another 10 per cent. Then the shoemaker demands more pay, and in turn is followed by the tailor and shirtmaker. This pyramiding goes on and on, until the purchasing power of the dollar is reduced to fifty cents. Finally the pyramid tumbles over, and business finds itself in a state of uncertainty. The amount of wages is of no importance, but the amount each of us produces for what he receives is of absolute importance, since it determines how much we can buy with what we receive. One large employer of labor in addressing a gath ering of his employes recently stated that, while their numerical strength had increased 11 per cent, this augmented force was actually producing 14 per cent less than the former force. An official of one of our largest railroad systems has publicly stated that it now takes 127 men to do the work accomplished by 100 men in pre-war days. REVIEW In such a critical period as this such facts are amazing and disturbing. The remedy is simple, and we must use every effort to have it applied. W e must quit wasting our time as we have been wasting our money. Every man must do his full share and encourage his neighbor to do his. Increased effort means increased production and increased production means lower prices. Coordinated and cooperative effort is as neces sary today to win the struggle against high costs as it was necessary to win the war, and there is no place iu America today for the industrial shirker who wilfully practices or advocates restricted pro duction. If an individual maliciously restricts his produc tion, whether it be brain or brawn, at office desk or shop bench, he must suffer a psychological reaction. For no man can be an honest workman unless lie gives the best he is capable of giving; unless he gives an honest day for an honest pay. In such an act a workman innately knows he Is cheating his employer, and such knowledge makes him less a man, and to that extent weakens his ability as a workman and his powers for production. Plenty o f M on ey for Legitimate Uses; Interest Rates are Higher The action of the Federal Reserve Bank in raising the discount rate is reflected in a more careful scrutiny by bankers of applications for loans to determine the purposes for which they are to be used. Bankers generally report that plenty of money is available for legitimate uses but none to be had for speculative purposes. Bankers feel that with the expansion of present business and the advent of new industries which are sure to come, they can employ their money more profitably than in specula tion. There has been very little activity in the acceptance market since the raise in discount rates the latter part of January. Before this time high money rates and the tightening of credit greatly curtailed the movement of acceptances, which were just beginning to regain their equilibrium after the December in crease in discount rates. The supply and variety of bills in the open market is good, but in spite of this the market has remained dull due to the lacfe of available funds for any form of investment. A n encouraging feature since the first of the year has been the number of new purchasers, who have found the higher return on acceptance investments an in centive to enter the market, but still the demand remains small due to the liquidation of credits, and is insufficient to bring about the desired balance in the market. Previously low money rates were indicative of a n increased demand, but iu spite of the comparatively low money rates of the past week there has been n o change in the general condition of the market. D eal ers are purchasing as few bills as possible, and a r e quite reticent in bidding on future deliveries, d u e to lack of credit accommodations and the fear th a t the open market rates may again increase in order to stimulate an essential demand. The open m arket rates for prime bills are as follows:—90 days 5 % t o 5 Z±—60 days to 5^6—30 days 5 % to 5/4* Dom estic Demand for Iron and Steel Cannot Be M e t; Export Business D im in ish in g • Lack of Materials Handicapping Greater Production Disturbed financial conditions in their acute form in the past several weeks have left no perceptible effect upon the trade situation in the iron and steel industry. The situation has continued one where the demand has been largely in excess of the supply, and if anything, the shortage of material with a consequent anxiety of consumers to obtain tonnage has been intensified. In certain lines in reality, the past several weeks has witnessed a more urgent de mand than any time previously and the amount business which producers have been forced to rejeet because they could not accommodate it, has been greater. The market has continued to be a sellers* market and from all present indications promises to remain of this character for an extended period. This conclusion is unescapable considering present production and the extent of the immediate and prospective demand. THE MONTHLY BUSINESS If present exchange conditions operate to restrict export trade in iron and steel, this promises not to be of serious consequence; in fact such a development would not be disturbing to the producers but rather would be welcomed by them, because of their over sold condition and the heavy insistent demands of domestic consumers. For several months past export business in iron and steel has been in diminishing volume, but this apparently has been due more to the inability of the mills to quote because of the lack of material than to fall in exchange with Europe. A significant analysis along this line made by the Iron Trade Review, shows that December exports of iron and steel were but 8 per cent of production for that month, whereas for the full calendar year of 1919 they averaged about 17 per cent. Further more a considerable portion of export business has been with the Far Eastern and South American countries where exchange conditions are more favor able. Some falling off of general export demand has accompanied the recent financial flurry, but there is still a very substantial volume of inquiry which is receiving a minimum of attention from the filled-up mills. Car shortages have been a big factor in iron and steel distribution during the past several weeks and they are continuing to have an important bearing both upon operating and market conditions. In a number of cases producers of iron and steel have been forced to scale down their operations either because of a lack of essential materials, such as coal, or because they had stocked about all the tonnage of finished rolled steel which their yards could ac commodate. The Carnegie Steel Company at one time had in its yards from 150,000 to 160,000 tons of finished steel which it could not ship to its custom ers because the cars were not available. Independent companies in the Pittsburgh and Youngstown dis tricts particularly, were affected to a corresponding degree. Some consumers who are running close on steel supplies in turn were affected adversely in their activities by the failure of material to arrive promptly. At the same time it sent them into the market in search of early tonnage and this has tended further to bid up prices. While transportation con ditions have been showing some spotty improvement they still are interfering seriously with the daily movement of materials and consequently with pro duction, and with severe winter conditions recently prevailing, this disturbance promises to be prolonged. With the return of the railroads to private control, March 1, a large volume of business in iron and steel is expected to be released gradually, since it is known that the needs of these systems for rehabilitation and maintenance are tremendous. Already a number of negotiations preliminary to the restoration of private operation are under way, especially in cars, locomo EEVIEW 3 tives, bridge work, etc. While the steel mills are crowded with business for months ahead, producers are deeming it good policy, considering the essential character of adequate carrying facilities in their own business, to take care of promptly the needs of the railroads up to a reasonable degree. While this policy will tend to further congest mill books and doubtless prolong deliveries to other consumers it is generally accepted by the larger interests as being a matter of absolute necessity under the circumstances. With iron and steel continuing to hold a sellers’ market, prices have maintained an uninterrupted advance during the past several weeks. These prices have been set largely through the bids of the buyers themselves, who apparently have made cost a second ary matter in their anxiety to provide themselves with material, for deliveries throughout the year of 1920. Pig iron buying during the past four or five weeks has been of tremendous volume and it is estimated by trade authorities that total sales in that period exceeded 1,000,000 tons. Consumers have bought freely at rising prices to January 1, 1921, and as a result, many furnace interests now find themselves sold up on the bulk of their expected output to that date. The advance in pig iron prices of the past month has ranged from $3 to $6 per ton. In a num ber of districts $45 for the base grade now is being quoted. Heavy inquiries for plates are reported mostly for the building of tank cars and oil tanks. The mills are booked for months ahead and are taking new orders only for regular customers and long deferred delivery. Specifications for tin plate are received for delivery as far away as June. Stocks of nails in jobbers and consumers hands are largely depleted, with no abatement in demand. The opening of the Lake Superior iron ore market for the season of 1920, at an advance of $1 per ton, has been attended by exceptionally heavy sales for so early a date. It is estimated that transactions in the open market and engagements of ore with operat ing companies by associated blast furnace interested, to date represent 25,000,000 to 30,000,000 tons. Pre dictions now are being made of a season’s movement of 60,000,000 tons. The new prices on iron ore are the highest in history for Mesabi ores and the highest on old range ores since 1881 and 1882. January production of pig iron showed a further encouraging expansion according to the statistics compiled by the Iron Trade Review. The output of coke and anthracite pig iron for that period was 3,017,192 tons, the highest since March, 1919, and an increase of 391,118 tons over December. The gain in active furnaces was 24, including 9 merchant and 15 steelmaking stacks. The number of furnaces in operation January 31 was 286 against 262 on Decem ber 31. THE 4 MONTHLY BUSINES8 REVIEW Unusually Active Season Forecasted For Lake Shipping In 1920 Sales of Lake Superior ores were made early in February at a general advance of a dollar a ton over the 1919 prices, and at the rate orders were booked at the new figures the furnaces and steel plants are figuring on working pretty close to top speed during the next year. Reservations were turned into con tracts as soon as the prices were announced and the sales amounted to millions of tons during the first ten days. A number of big orders were booked in the eastern market, and shipments of lake ores to that district will be much heavier than they were last season. The sales indicate a big increase in shipments over 1919, when the fleet delivered 47,177,395 tons, and shippers that follow the game closely figure that the mines will send forward about 60,000,000 tons. In order to reach that figure, boats will have to get good dispatch at both ends of the route; but it is feared that the freighters will spend much time in port unless the rail situation shows improvement. Rail road equipment is in bad shape, and there is a short age of cars and motive power all along the line. Coal is going forward from the upper lake ports as fast as the railroads can handle it and stocks w ill be low all around by the opening of the shipping season. An effort is being made to send coal to Lake Michigan ports by rail, but the shippers are meeting with very little success in that operation owing to the short car supply and the big demand, in local trades. The outlook in the lake trade is very good a n d business is offered freely at both ends of the route. Barring labor trouble (which cut quite a figure la st season) the fleet will be kept busy from start to finish if the ore and coal carrying railroads can m ake good and take care of their ends of the business. Ore is slow going forward to the furnaces from the Lake Erie ports on account of the short car supply and there will have to be a marked improvement along that line to put the docks in good shape at the opening. The vessel men are quite confident that carrying charges will be put back to 1918 rates, when chartering was done on the basis of a dollar a ton n et from ports at the head of Lake Superior. A general cut of 20 per cent was made in rates last season. Manufacturing Suffering from Lack o f Fuel and Shortage o f Cars The only clouds on the industrial sky are the trans portation and fuel situations. There have been sus pensions of operations in some factories on account of the inability of the railroads to get material either into or out of their yards. The complaint is general throughout the District, and if the condition is not improved it will result in a still further reduction in output. There seems to be a tendency among manufactur ers to safeguard their raw material stocks and even their finished products, perhaps to the extent of hoarding, on account of the uncertainty of this situa tion. While some complaint is heard of lack of sufficient labor, there has been an improvement in this regard during the past sixty days. Manufacturers generally are now more concerned about the efficiency of what labor they have. The great difficulty is, as a large employer of labor states, “ to get men who are will ing to really work.” Many factories, particularly in Ohio, have been running on a “ hand-to-mouth” basis in the matter of fuel. Automobile makers report no let-up in the demand for cars, and the number made will be limited only by the ability of the factories to turn them out. Business in the tool manufacturing line is ex tremely active, with the demand continuing for high speed steel tools for automobile manufacturers. The brick industry reports a veritable flood of orders for fire clay and silica brick. The industry as a whole is reported running at about 50 per cent of capacity, whereas the volume of business would war rant full capacity except for a shortage of cars. One building-brick concern reports they are 250 cars be hind ordinary allotment. Makers of tin cans report an active demand and. orders on file to carry them well into the summer. The glass industry is entering into what would appear to be one of their most prosperous years. The demand for all grades and kinds of glassware is insistent, and many concerns now have orders booked, to assure capacity production for 1920. The activity of the general ware pottery industry this year is indicated by the fact that more kilns w ill be added to the capacity of the country this year than for probably 10 years. There is now assurance that at least 34 new updraft kilns will be placed in operation this year in the East Liverpool section, in addition to the erection of one five-tunnel kiln p ot tery, and these kilns are said to have a capacity at the ratio of five to one of the updraft kilns. The possible increased production of general ware this year is therefore equal to that of 59 kilns. The demand for American pottery products is n o ^ showing the highest point in the history of the trade. Importations are far below normal, and buyers o f foreign wares who have recently visited Europe and returned home declare it will be some few years be fore imported chinas and earthenware will have an y effect toward creating any decline in the general demand for American pottery products, but as the country grows so will the demand for the American output. Manufacturers of textiles are optimistic concern* ing their lines for the year 1920. Prices of woolen goods show considerable advances over those of % year ago, but the buying demand appears as strong as ever. Retail stocks of woolen goods are low for the most part, and large orders are being booked for the fall trade. THE MONTHLY BUSINESS 5 REVIEW Fourth District Business Forecast for 1920 We present to our readers this month a tabulated forecast of business conditions for the year 1920, compiled from questionnaires received from 21 manu facturers or producers in this District representing as many different industries. Many problems face the business man today, and upon a correct solution of them depends largely the success that will come to him. We offer this tabula tion, representing the views of prominent business men, as an aid to him in working out his policy for the year. While opinions are in agreement on many points, on others we find a wide divergence, running from what seems to be prejudice and bias on the one hand, to extreme caution on the other. The answers received were in response to the fol lowing questions: 1. Do you expect any material changes in general price levels? 2. What do you consider will be contributing causes to such changes? 3. How long do you think our present prosperity will continue? 4. What causes will bring about a change? 5. Should we experience business depression, what classes will be least affected? 6. Do you believe that the labor situation will im prove as regards stability and efficiency? 7. What, in your judgment, will be the trend of wages in 1920? 8. What is your opinion of the outlook as regards our foreign trade? 9. Do you anticipate an attempt at price cutting in your goods during 1920? 10. Do you expect the present public extravagant purchasing to continue? A summary of the replies received is given below. 1. Do you expect any material change in general price levels? Replies: Increase in p r ic e s ..................................... 10 Decrease in p rice s ..................................... 4 No changes................................................. 7 2. What do you consider will be contributing causes to such changes? Replies: Increase or decrease in production (de pending upon views as to price ad vance or decline) ................................. 9 Refusal of public to purchase at current price le v e ls ............................................. 2 Reduced foreign dem and.......................... 6 Restriction of cred its............................... 2 Increased manufacturing costs................ 4 In further reply to this question, No. 17 (Tool manufacturer) says: “ Business activities and ex travagant buying, together with restricted produc tion, would all point to higher prices for the near future, but the restriction of credit facilities by the banks would seem to indicate that the long run movement would be downward.” 3. How long do you think our present prosperity will continue ? Replies: Several years (2 to 7 ) ............................... ...8 One y e a r ........................................................6 Less than 1 y e a r ....................................... ...1 Dependent upon conditions.........................4 Manufacturer No. 8 (Clothing) sees prosperity ahead “ so long as high wages continue and war economies remain unspent.” No. 4 (Wholesale Dry Goods) regards it in this light: “ Prosperity will continue as long as the tremendous demand for auto mobiles continues to exceed production.” No. 10 (Farm Implements) says: “ The producers of raw materials are probably six months behind orders and it will take some time to catch up, but it is the writer’s opinion that in many instances the shortage of materials is apparent rather than real as manufac turers have found it necessary to anticipate their requirements by at least six months to insure a bal anced inventory that would permit uninterrupted production. We feel that it is reasonable to look for some recession from the present high degree of prosperity which is based upon price inflation, and decreased production, following which there should be several years of a more real prosperity upon a more solid foundation.” No. 21 (Pottery) indicates his belief that prosperity will remain with us “ so long as Europe remains idle.” 4. What causes will bring about a change? Replies: Increased production............................... ....9 Restriction of cred its............................... ... 3 Labor difficulties....................................... ... 2 General business depression....................... 1 Reduced foreign dem and............................. 4 Decreased demand..................................... ... 1 Number 10 (Farm Implements) says in this con nection: “ As to just what causes will bring about a change, it is difficult to say, but the most effective cause will be a stoppage of unnecessary purchases, and it would appear that the present unsettled situa tion may contain the elements which will afford the necessary object lesson to exert a sobering and re straining influence upon the great American public.” 5. Should we experience business depression, what classes will be least affected? Replies: Salaried or income c la s s ......................... ....5 Dealers in or producers of foodstuffs. . . . 6 Automobile and allied industries............... 2 All classes ................................................. ... 7 The th r ift y ................................................. ... 2 (Continued on Page * ) THE 6 MONTHLY BUSINESS REVIEW THE MONTHLY BUSINESS 7 REVIEW Business Forecast for 1920 Do you expect any m a terial changes in general price levels? W hat will be con tribu ting causes to change? How long do you think our present prosperity w ill continue? What causes will bring about a change? Should we experience business depression what classes will 'je least af fected? Do you believe the labor situation will im prove as regards stability and effi ciency? W hat will be the trend of wages in 1920? W hat is your opin ion of the ou tlook as regards foreign trade? Do you anticipate an attem pt at price-cu tting in your goods? D o you expect pu blic ex travagant purchasing to continue? (1) Stove Mfr. Yes; increase. Supply and demand. Three to five years. Increased production. Yes. Slightly upward. Not very encouraging. No. Yes. (2) Scale Mfr. Not soon. Supply and demand. This year. Changes of administrative policy and interest rates; contraction of currency and credits. No. Upward. Discouraging unless im provement in foreign money market. No. Yes. (3) Wholesale Milliner Not in 1920. This year. Increased production. Dealers in ftijd producers of food stuffs. Yes. Upward if any change. Gradual increase. No. Yes. (4) Wholesale Dry Goods. Not for next few months. Refusal of public to pur chase at present prices. Over-speculation or collapse of foreign markets. Salaried class* Yes. Continued high wages. Good if credits can be es tablished. No. No. (5) Mfr. of Canvas Goods. Possibly upward. Decreased production, cur tailed exports. Until production more near ly equals consumption. Increased production; saner spending. Food produeej-a. Yes. Slightly upward. Good. No. No. (6) Producer of Petro leum and Petro leum Products. Possible advance. Decreased production. Dependent upon conditions. General strikes or financial difficulty. All classes. No. Good if satisfactory credits are arranged. No. Yes. (7) Meat Packers. Gradual reduction in near future. Increased production; re duced buying demand; lack of foreign trade. Several years. Increased production; un favorable foreign exchange situation. Agricultural «ind allied in terests. Yes. No change. Poor; depends upon ex change and credits. No. Yes. (8) Clothing Mfr. Not within months. Reduced exports. So long as high wages con tinue. Decreased demand. Those with fixed incomes; labor. Only if demand for labor subsides. Upward first half; ward second half. (9) Auto Truck Mfr. Probably upward. Decreased production. No present tendency to diminish. General business depression. Yes. Upward. Prospect splendid. Generally, yes. No. (10) Agricultural Imp. Mfr. Substantial reduction near future. Restriction of credits; lack of foreign demand. Several years. Curtailment of unnecessary expenditures. Salaried class. Yes. No change. Excellent if exchange situa tion improves. No. Yes. (ID Machine Tool Mfr. Not for some time. One year. Unreasonableness of labor; social Bolshevism. Producers of I'ood-stuffs. Yes. No change. Excellent but depends on exchange situation. No. Yes. (12) Auto Mfr. No. Two to five years. Increased production. The thrifty class. Gradually. No change. Hopeless unless credit situa tion improves. No. No. (13) Office Equipment Mfr. Possible slight advances. At least this year. Reduced foreign demand. Producers of »nd dealers in food-stuffs. No. No decrease. Unfavorable generally. No. Yes. (14) Textile Mfr. Slight recession. Three to five years Increased production. The frugal clfgg. Yes. No change. Fine. To no great extent. No. (15) Wholesale Grocer. Gradual increase. One year. Lack of funds for extension. Dealers in nej essities. No. Upward. No. Yes. (16) Coal Producer. No. Yes. Slightly upward. No. Yes. (17) Tool Mfr. Slight decrease. Restriction of credits. No. Upward first half; ward second half. down Discouraging food-stuffs. No. Yes. (18) Mfr. of Hoisting Machinery. Yes. Increased duction. Yes. Upward first half; ward second half. down Good. Probably last half of year. No. (19) Mfr. of Rubber Goods. Yes. Increased cost of raw material Two years. and labor. Increased production. Steel and automobile and allied industries. No. Upward. No. Yes. (20) Steel Products Mfr. Yes. Lack of foreign demand; limited production. Three years. Increased production. Steel, automotive, oil in dustries. Yes. Upward. Bad. No. Yes. (21) Pottery Maker. Yes, advances. Increased Mfg. costs. See remarks. Increased production, con servatism and thrift. Salaried class and necessary labor. No. No change. Bad— due to domestic de mand. No. Yes. year or 18 in Increased cost of labor and material. Under production; higher wages. Two to seven years. European Five to six months. pro • 18 months Restriction of credits. Increased duction. European Salaried class. pro down Yes. Foreign trade will show net loss. Dependent upon credits. except for THE 8 MONTHLY (Continued rom Page 5) Number 14 (Textiles) answers this question by declaring that the classes least affected will be “ the frugal, and business concerns who are not greatly in debt.” 6. Do you believe the labor situation will improve as regards stability and efficiency? Replies: Y e s .............................................................. 13 N o ............................................................... 7 If demand subsides................................... 1 7. What will be the trend of wages in 1920 ? Replies: U p w ard ...................................................... 12 Downward ................................................. 0 No change ................................................. 8 Three of the replies to this question stated that wages will show a downward trend during the latter half of the year. 8. What is your opinion of the outlook as regards foreign trade? Replies: G o o d .............................................................. 9 B a d ................................................................ 9 Practically all replies to this question were quali fied by expressions regarding exchange rates, al though a preponderance of opinion regards the situa tion favorably if satisfactory credits are provided for. 9. Do you anticipate an attempt at price cutting in your goods? Replies: N o ..................................... .......................... 18 Y e s .............................................................. 2 On this question, business seems to be in accord. 10. Do you expect the present extravagant pur chasing to continue? Replies: Y e s .............................................................. 15 N o ............................................................... 6 BUSINESS REVIEW Number 19 (Rubber Goods) says, with reference to this question: “ We look for the present public extravagant purchasing to continue just as long as the workmen are earning such high wages. A good many of them have never earned much money before, and do not appreciate the value of a dollar. Neither do they consider the future, feeling that this year’s wages will continue indefinitely. It seems that a little money has had a tendency to burn a hole in their pockets and their single aim has been to dis pose of it in some manner. Some of the working people who were not extravagant so far as purchas ing high priced clothes or automobiles were con cerned, have considered themselves wise investors, and bought stock in oil or gas well propositions. These high wages from this angle have proved to be a bonanza for unscrupulous promoters who have fleeced the working people out of millions of dollars on different kinds of schemes where it was simply a case of heads I win, tails you lose. In a large per centage of these stock promotion schemes, no one but the promoter makes any money.” It is evident from the cheerful tone of a majority of the replies received that there are no breakers ahead for American business in the near future. The foreign situation is causing some concern, and will unquestionably influence domestic conditions. The outlook appears to be for high or even higher wages, but a compensating off-set is found in the belief that the efficiency of labor will improve. The concensus of opinion is that extravagant pur chasing will continue, though the reports we receive from dealers who are in closer touch with the people reflect the opposite opinion. The judgment of these manufacturers seems to confirm our belief, stated in our last Review, that “ We cannot bring ourselves to the pessimistic pre diction for 1920 which is being expressed by some of our statistical and economic experts. While with out question there are many grave problems con fronting us, yet the ability of our country which settled just as grave ones during 1919 strengthens our courage and optimism for 1920.” M ine Activities Hampered by Lack o f Cars; Oil Production Barely Sufficient to M eet Growing Demands Reports indicate that the car supply at the mines has seldom been above 50 or 60 per cent since the strike, and that it has averaged as low as 30 per cent at some points. In many places miners have been able to work but two or three days during the week, and remain idle until another lot of cars arrives. By reason of this condition, the coal output in this Dis trict is disappointing, and the effects are now being felt in various industries. As we have previously stated, coal production is dependent upon car supply, and mines cannot operate at capacity until the car problem is solved. The production of coke has fallen off for the same reason. At the close of the first week in February, the Connellsville region reports indicate a lower average output of coke than for some months past, though the first few days of the second week indicate that some improvement is probable. Petroleum producers are confronted with an ab normal demand for all grades of oil, yet more and more must be diverted to by-products to meet the extraordinary demand for lubricants, and the fuel needs of automobiles and tractors. Some new drilling has been begun, but all indications point to a comparative scarcity in the future unless productive effort is greatly stimulated. During the past year the Kentucky fields have in creased their oil output to more than double that of 1918, the production last year being 9,139,317 barrels as compared to about 4,000,000 barrels the previous year. THE MONTHLY BUSINESS REVIEW 9 “ Flu” Epidemic a Restraining Factor in Mercantile Lines; Luxury Buying a Feature in Grocery Trade The recurrence of the epidemic of influenza has naturally dampened the spirit of shopping, keeping many at home who would otherwise be on the streets and purchasing. This has not been true to such an extent that sales are less than a year ago, but the increases have not kept pace with previous months, although still large. Department stores report a quite satisfactory trade, with prices showing a tendency to harden somewhat, and buyers showing more conservatism in their purchases. Retail grocers report unusually good business with a brisk demand for the higher grades of goods, es pecially among the laboring class. The retail trade is anticipating a gradual reduction in the line of groceries. Poor rail and express delivery together with inexperienced help has made it difficult to carry on business. Leather Prices Advance; Brisk Demand for All Leather Products Conditions in the hide and leather markets have not greatly changed during the past 30 days. The advances in raw material values following the clean-up sales in December were maintained for a few weeks and quite a volume of leather sales were consummated during January at slight variations in price. The recent high money rates and decline in stocks, however, have had a deterring effect upon new pur chases of leather, as well as hides and skins, and at the present writing there is evident a decided ten dency to await developments and buy only for the needs of the moment. The underlying conditions in the leather industry are practically unchanged. All commodities manu factured of leather are in excellent demand. Users of leather are in general carrying very small stocks, and it has not yet been evident that there is any sur plus of leather over domestic requirements. Tanners have supplied themselves more or less liberally with hides in the endeavor to avoid buying the undesirable winter take-off, these purchases be ing made at prices which permit of no decline in leather values if a profit is to be realized, and it is reasonable to assume that if financial conditions take a turn for the better there will be a continued de mand for leather in good volume at steady prices. Shortage o f Labor Will Decrease Food Production; Wheat is Damaged by Fly. Live Stock M arket Sags The shortage of labor is giving farmers serious concern. There is no question that this will affect the management of many farms and no doubt result in a lesser production of those crops which require the most labor. There is also a growing feeling among the farmers that until they are assured of more and better help, the only solution of their problem will be found in reducing acreage. Reports are a unit in declaring that considerable damage has been done to early sown wheat by the Hessian fly, though the effect cannot be measured before Spring. Estimates of the damage vary from 20 to 30 per cent. The spell of warm weather during the past month and the subsequent freeze has covered many fields with ice. Some damage may result, although entire sections report wheat now unharmed notwith standing this condition. The tobacco crop has for the most part been mar keted, though there has been some discontent over prices and hesitancy in the final sales. The Government report of live stock on farms on January first shows that, the country over, cattle on farms are on a par with 1919, but show an increase of about 10 per cent above a ten year average. Hogs are 2,600,000 short of 1919, but the increase is about 8 per cent over a ten year average and with the gain in weight of the hogs this winter over other years, the yield in product will be equal in pounds with the packing records of 1918-1919. Prices of live stock show a slight downward ten dency, in spite of a heavy domestic demand. Foreign competition is almost entirely absent from the markets. THE 10 MONTHLY BUSINESS REVIEW Car Shortage A cu te; Freight Embargos Declared at Som e Points When it is understood that with the 2,700,000 freight cars iu existence it requires about 1 00 ,00 0 new cars each year to take care of the d ep recia tio n by the entire loss of cars, and further that when t h e tonnage to be transporated doubles itself d u r in g every period of ten to twelve years, it can be r e a d ily seen that unless three or four hundred thousand n e w ears are built each year, the carriers cannot p o s s ib ly keep pace with the industrial growth. A shortage o f transpor tati on facilities is the s u b j e c t o f much discontent in all classes o f industry. Coal mines are unable to send fie l f o r w a r d in the desired quantities, and unless relief comes soon there m a y be e n f o r c e d periods o f idleness in many shops and factories. R a w materials as well as finished p r o du c t s are be i n g off ered f or shipment in amounts b e y o n d the c a p a c i t y o f the railroads to c a f e for them. F r e ig h t e mb ar goes have been d e c l ar e d at some points until present c o n g e s t e d c o ndi t i o ns are relieved. T o l e d o yar d s are said to hold several thousand ears — b o t h l oad ed and empties. The table below shows car movements in the C le v e land district during the month of January : 1919 The e mp t y car situation is a ve ry serious o n e and it is d o u b t f u l if all o f the c a r - p r o d u c i n g plants in t h e c o u n t r y will be able in less than t w o or t h r e e years to furnish the equipment necessary to sati sfactori ly mo v e the larger porti on o f the* to nnag e offered. Received Forwarded Total Cars 27,647 17,747 Tons 959,913 499,778 45,394 1,459,691 1920 Cars 34.9S5 1S.40S 53.393 T on s 1,191,277 472.159 1,663,436 European Trade Disturbed by Drop in Exchange; Outlook Bright in Latin-America and Far East The fore i gn trade o f this District r eceived a severe shake whe n f o r e i gn e x c h a ng e took a slid*.- to levels und r ea med of. A c c o r d i n g to reports, h owever , the d a ma ge to the exp o r t e r s is not as great as mi ght be expected. Cancel lati ons o f orders were c o m p a r a t i v e ly f e w ; shippers expect that tile effects will b e f e l t more d u r i n g the next f ew months by a curtail ing o f orders until rates are nearer normal. The shippers f o l l o w e d o pposite courses o f action - some wi t h d r a wi n g f r om thi r t y- day or si xt y-day sight procedure to cash in Ne w Y o r k , whi le others e x tended longer time. Those firms operating on a fixed rate of exchange or who are having their funds abroad felt very little effects. Trade from other parts of the world continues to hold good, and there is an increasing number o f manufacturers directing their energies to South America and the Far East. The 19J1 exposition of American goods in Buenos Aires is already receiv in g the attention of Cleveland exhibitors. Recent activities indicate that the St. L aw ren ce route to the sea will receive considerable more a tte n tion this coming year than it did last year. Building Operations Show No Decided Change There is no important cha ng e in b ui l di ng c o n d i tions thr ou ghou t the district as a w hole. Some i m pr ovement is s hown in the smaller centers, but in all o f the larger cities a large shortage ot housing tacilities is reported. While* the c onst ruct i on o f new homes has shown a t e n d e n c y to decrease, due to the greatl y increased cost of erection, the b u i l di n g of ma n u f a c t u r i n g plants goes on in considerable* volume. I nusual activity is being shown in Cleveland, C in cinnati and Akron. During the mo n t h of J au u arv b ui l di ng permits were issued in C l e v e l a n d covering a total ot $7,000,000—an amount never before rea ch ed or even approached. Builders are looking forward to one of the best years in their history. A tabulated statement of building permits issued in the larger cities of the district a p p e a r s elsew here in this Rciiczi'. Hoover Urges Cooperation in Food Draft Plan A n ew plan ma k i n g it possible for t h o s e in this c o un t r y to help s u p p l y f oods to relatives or triends they may have in the section o f K u r o p e most a f f e c t e d b y the "food shortage, has been an no u n c e d by UnAme r i c a n Rel i ef A dmi ni s t r a t i o n o f whi ch Mr. H e r bert H o o v e r is chairman. The plan, whi ch c o m p r e hends the pur c hase of “ Food D r a f t s " in t h i s coun try, whi ch will be ho no r e d , not b y . ash but b y actual tood when p r es ented in certain E u r o p e a n c i t i e s seems emi nentl y s o u n d in view o f c o n d i t i o n s Ereuerally. Mr. Ho o v e r , in a letter, outl i nes t he p la n „ follows: ** THE MONTHLY “ American Relief warehouses, established in Warsaw, Hamburg, Vienna, Budapest and Prague, are now being stocked with the following commodi ties: Flour, bacon, beans, canned milk, corned beef, lard and cotton seed oil. We have arranged with the American Bankers’ Association to circularize im mediately their twenty-two thousand banks in Amer ica, requesting the assistance of each bank in selling Food Drafts in denominations of ten and fifty dollars to customers desiring to help individuals and friends in Poland, Germany, Austria, Hungary, and Czecho slovakia. The purchaser receives a Food Draft to be mailed to the person he desires to assist in one of the above named countries, who will be entitled to re ceive upon presentation of this Food Draft at nearest BUSINESS REVIEW central warehouse the food designated on the Draft of an equivalent value to the cost of the Food Drafts. There are two ten and two fifty dollar Food Drafts, designated to meet Christian requirements and Jew ish requirements. This plan has been presented to and approved by the State Department, Federal Re serve Board and the United States Treasury, and also by each of the European countries concerned. The European Governments will hold all contents of American Relief Warehouses free of requisition and will assist in transportation and entry of all foods. Should any profit accrue from the operations, it will be turned over to the Children’s Fund.” It is very desirable that bankers generally should cooperate in making the ‘ ‘ Food Draft ’ ’ plan possible. The following banks have been adm itted to m em bership since our last report . Resources. Atwater Savings Bank, Atwater, Ohio................................................................ $312,000 New National Banks Capital. First National Bank, Davidsville, Pa..................................................................$ 25,000 Citizens National Bank, Ellwood City, Pa.......................................................... 100,000 Citizens National Bank, Bluffton, 0 .................................................................... 50,000 II THE 12 MONTHLY BUSINESS BE V I E W Clearings January 16 to February 15 1919 1920 Akron Cincinnati Cleveland Columbus Dayton Erie Greensburg Lexington Pittsburgh Springfield Toledo Wheeling Youngstown Total Increase Per cent oi Increase 50,504,000 290,023,566 506,679,342 62,310,300 20,982,390 9,788,277 4,985,009 9,744,739 657,684,655 6,540,938 62,652,148 21,812,281 20,473,627 28,452,000 269,495,619 403,266,065 50,272,700 17,197,440 8,757,818 3,953,863 7,106,704 576,992,423 5,549,720 47,183,883 19,135,973 15,983,683 22,052,000 20,527,947 103,413,277 12,037,600 3,784,950 1,030,459 1,031,146 2,638,035 80,692,232 991,218 15,468,265 2,676,308 4,489,944 77.5 7.6 25.6 23.9 22. 11.7 26. 37.1 13.9 17.8 32.7 13.9 28. 1,724,181,272 1,453,347,891 270,833,381 18.6 Total Debits by Banks to Individual Accounts W eek Ending Feb. Akron Cincinnati Cleveland Columbus Dayton Erie Greensburg Lexington Oil City Pittsburgh Springfield Toledo Wheeling Y oungstown Feb. 11, 1920 12, 1919 Increase or Decrease Per cent o f Increase or Decrease 27,991,000 58,974,000 148,918,000 27,678,000 11,468,000 6,304,000 4,029,000 11,550,000 1,865,000 173,188,000 3,135,000 23,477,000 7,223,000 16,050,000 16,086,000 49,168,000 103,922,000 21,812,000 10,877,000 5,858,000 2,760,000 8,951,000 1,984,000 154,406,000 2,717,000 21,449,000 6,481,000 12,550,000 11,905,000 9,806,000 44,996,000 5,866,000 591,000 446,000 1,269,000 2,599,000 119,000— 18,782,000 418,000 2,028,000 742,000 3,500,000 74. 19.9 43.2 26.8 5.4 7.6 45.9 29. 5.9— 12.1 15.3 9.4 11.4 27.8 521,850,000 419,021,000 102,829,000 24.5 Total Building Operations for M on th o f January Permits Issued New Construction Alterations 1919 1920 1920 1919 Akron Cincinnati Cleveland Columbus Dayton Erie Lexington Pittsburgh Springfield Toledo Wheeling Y oungstown Total Valuations New Construction Alterations 1919 1920 1920 1919 170 112 93 40 148 113 46 65 69 35 20 41 17 21 88 70 4 1 43 64 3 8 52 36 29 335 285 36 22 10 459 47 6 37 4 6 27 237 318 49 22 22 259 59 1 36 12 11 3,466,373 1,311,500 6,891,000 870,755 573,486 73,322 1,110,150 734,545 2,250 751,874 13,525 156,475 293,113 11.325 761.200 91.555 125,845 76,035 212,225 175,372 800 114,665 1,900 118,275 30.150 307,160 369,925 84,220 49,220 16,631 867,150 124,065 9,700 45,700 200 60,000 29,185 138,935 166,700 31,805 11,527 40,999 75,579 106,199 800 24,421 1,065 4,475 628 1,276 1,053 15,955,255 1,982,310 1,964,121 631,690 731 Inc. or Dec. o f Percent Total Valuations o f Inc. 1920 over 1919 or Dec. 3,174,225 985.7 1,468,400 978.6 6,333,025 683.1 831,615 675.6 485,334 354. 27,081— 23. — 1,689,496 588.5 577,039 205.3 10,350 :1000. 658,488 473.3 10,760 500. 93,725 76.2 15,305,376 585.5
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