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MONTHLY BUSINESS REVIEW Covering financial, industrial Fourth F e d e ra l Reserve District and a g ric u ltu ra l c o n d itio n s Federal Reserve Bank of Cleveland V o l. 22 Cleveland, O hio, March 30, 1940 W hile the business decline in progress since December has shown signs of leveling off recently, current produc tion rates in many industries are still in excess of incom ing orders and backlogs are being reduced or inventories built up. Unfilled orders carried over from 1939 w ere an im portant sustaining factor during the first quarter of 1940, but in some cases this support was eliminated by midM arch; in other fields backlogs wrere still substantial. C ur rent production, however, appears to be more nearly in line w ith actual consumption than during the fourth q uar ter last year. Nevertheless, new business in several lines rem ains low since needs are being filled by deliveries on orders placed some time ago or by reduction of stocks accum ulated since last September. T his description of present business conditions is p ar ticularly applicable to the steel industry, in which operat ing rates fell from a high of 94 percent of capacity early in December to 62.5 percent in mid-M arch. The decline was rapid in January and February, but slackened in M arch ; the national rate remained unchanged in the third week of the month, but dropped to 61 percent at the m onth end. Expansion usually occurs at this time of year, however, and although there has been some pickup in new business, incoming orders are still lower than steel ingot production. P relim inary Ohio employment data show that general business activity has been m aintained better than steel ingot production, for although earnings of steelworkers and blast furnace employees fell twelve percent in F eb ru ary from their January level, total payrolls in all indus trial groups declined only two percent. T he number of iron and steel w orkers was off four percent, w hereas the decline in total employment was less than one percent. T he relatively large drop in payrolls as compared with num ber of w orkers was caused by few er hours worked, there having been little variation in wage rates recently. T he automobile industry was an im portant factor in sustaining activity in this district during F ebruary, for production of new cars and trucks was the second largest in history for that month, and heavy shipm ents of parts, tires, and glass to assembly plants kept operations in m any fourth district factories at unusually high levels for th at time of year. T he large volume of assemblies, how ever, resulted in expansion of dealers’ stocks of new cars, and production schedules rose less than seasonally in M arch. P a rts m akers reported in m id-M arch that automobile p ro No. 3 ducers were reducing inventories of parts and supplies used in 1940 models, and orders had fallen off sharply. This reduction was said to have started earlier th an u su a l O perations in nondurable consumers’ goods lines varied considerably, depending in large p art upon seasonal fac tors. In m id-M arch textile mills were running on reduced schedules following completion of w ork on spring lines. E arly orders for fall delivery were considerably less than for the spring season ju st closed. M en’s clothing makers w ere still producing at capacity in an attem pt to deliver m erchandise ordered last fall. W om en’s w ear plants had reduced operations following disappointing E aster busi ness. Shoe m anufacturers were nearing the close of their spring season. Low volume of fill-in orders for clothing and shoes was attributed to the early E aster and unfavor able weather. Retail trade advanced slightly less than seasonally in February, and departm ent store sales in this district were only three percent higher th an a year ago, on a daily average basis. L arg er gains over 1939 w ere reported in the first three weeks of M arch, but most of the rise was caused by early occurrence of E aster. Sales w ere consid erably lower than in corresponding pre-E aster weeks last year. T he total volume of construction contracts awarded in this district during F eb ru ary was sharply low er than in January, but advanced more than seasonally in the first half of M arch. T he F eb ru ary decline w as caused by ab sence of large G overnm ent housing projects in that m onth’s THE MONTHLY BUSINESS REVIEW 2 totals. P riv ate w ork rose, and exceeded both January and the corresponding month in 1939 by about 20 percent. FINANCIAL Member B a n k Reserve balances of member banks in Reserves this district, particularly at banks lo cated in reserve cities, have increased sharply during the last twelve months. In the first half of M arch they averaged $705,577,000 com pared w ith $509,668,000 during the sim ilar period a year ago. T his was a gain of 38 percent. Reserve requirem ents also rose as custom ers’ deposits expanded, but the grow th in require ments was sufficient to absorb only approxim ately $50,000,000, so that excess reserves rose to about $335,000,000, or 90 percent of requirem ents. As shown in the accom panying charts, most of this grow th in reserve balances occurred at banks located in the five reserve cities of this district. Banks in Cleve land, Pittsburgh, Cincinnati, Columbus, and Toledo, which at the present time are required to m aintain reserves equal to 17^2 percent of their demand deposits and five percent of time deposits, accum ulated reserves rapidly during most of 1939 and the first quarter of 1940. All other banks in the fourth district, whose reserve requirem ents are twelve percent of demand deposits and five percent of tim e de posits, have shown little change in reserve balances since mid-1938 except for a short period last September. A t that tim e their reserves increased by about $10,000,000. T he rise in reserve balances of reserve city banks d u r ing the past year wras mainly the indirect result of in creased holdings of prim ary m onetary reserves in this country. A ccretions to this country’s gold stock have been substantial, and although the proceeds from im ported or newly-mined gold are seldom deposited w ith banks in this dis trict, reserve balances which originated in the form of gold gradually become available to local banks as these new funds are invested or spent for fourth district products. T he grow th in reserve requirem ents at both reserve city and country institutions shown by the charts as h av ing occurred from mid-1938 to date resulted from steady expansion in the volume of custom ers’ deposits. Changes in required reserves during 1936, 1937, and 1938, how ever, w ere largely due to action taken by the B oard of G overnors of the Federal Reserve System pursuant to authority granted by the B anking A ct of 1935, first in raising requirem ents to the m axim a perm itted by law, and then in reducing them somewhat. It is apparent th at these changes in required reserves had quite different ef fects on the volume of excess reserves possessed by the two classes of banks even though increases in requirem ents were proportionate for each class. T he increase in reserve requirem ents during 1936 reduced excess reserves of reserve city banks m aterially w ithout affecting those of other banks to any extent. Country banks in this district built up re serve accounts at th at time by draw ing on balances w ith correspondents. The 1937 increases, however, resulted in some reduction of country banks’ excess reserves, but the decline w7as not as large as at city banks. W hen require ments w ere lowered in A pril 1938, excess reserves of both classes of banks rose by approxim ately the am ount of this reduction. Member Bank Credit The upw ard tren d in commercial and industrial loans at weekly reporting mem ber banks in this district w hich was apparent in F ebruary continued through the first three weeks in M arch. In the seven weeks ended M arch 20 total funds loaned to commercial and industrial borrow ers exceeded repaym ents by $20,000,000, raising the am ount of this type of loans outstanding to $273,000,000. T his was the highest figure recorded since early 1938, w hen loans w ere first classified on the present basis, and was 17 p er cent larger than a year ago. So-called “oth er” loans also expanded in M arch, but real estate loans declined slightly. Changes in security investments of these banks during M arch w ere also sim ilar in character to F ebruary shifts. H oldings of T reasury notes w ere reduced, but this was offset in p art by larger investments in longer-term Gov ernm ent obligations, both direct and guaranteed. T he trend in adjusted demand deposits was upw ard until the th ird week in M arch, when Federal income tax pay ments resulted in a transfer of funds to the G overnm ent’s account w ith the Federal reserve bank. Federal Reserve T his collection of taxes on 1939 income Bank Credit was largely responsible for a decrease in member bank reserve deposits at the Federal reserve bank in the week ended M arch 20, and a corresponding increase in the U nited States T re asu re r’s balance. Except for this tem porary reduction, member bank reserves have been rising steadily. B orrow ing from the Federal reserve bank, therefore, has rem ained low ; only two member banks w ere borrow ing late in M arch. T otal bills discounted on M arch 20 am ounted to $148,000, more than half of which represented foreign loans secured by gold. W orking capital loans to industry advanced slightly in the THff MONTHLY BUSINESS REVIEW first half of M arch. There was a slight reduction in holdings of Governm ent bonds in the third week of the month. MANUFACTURING, MINING In recent weeks the rate of contraction in steel mill operations has moderated, but expansion which usually occurs at this time of year has failed to develop. T he national steel rate rem ained unchanged at 62.5 percent of capacity in the third week of M arch, but declined to 61 percent at the month end. T his represented a drop of only about four points during M arch, w hereas operations had declined ten points each in January and F ebruary. M ost m ajor producing areas in the fourth district have followed the national trend quite closely since last D e cember, but in M arch there was a slight pickup in op erations at P ittsburgh, Y oungstown, and Cleveland. Only Cleveland and W heeling in this district, however, have continued to operate at rates higher than the average for the entire country. Steel consumers bought heavily in the fourth quarter last year, taking delivery on as much steel as the mills were able to furnish at that time, and providing steel producers w ith large backlogs which w ere carried over into 1940. T his heavy volume of purchases was more than sufficient for fabricators’ needs, and when it became apparent th at prices would not be raised and that deliveries could be depended upon, orders fell off sharply as steel consum ers met current needs from stocks built up last fall or from deliveries on orders placed immediately after outbreak of w ar in Europe. Newr business com ing to steel producers, therefore, was in low volume during the entire first q u ar ter of 1940, w ith estimates placing incoming orders at only 40 to 45 percent of capacity during most of the period. By mid-M arch some companies had worked back logs down to a minimum and w ere dependent entirely on cu rrent orders for m aintenance of operations, but others w ere still delivering steel on commitments made some time previously. D espite the low volume of orders, steel consumption has held up relatively well, according to fabricators’ reports, and is thought to be at a higher rate than ingot produc tion as well as above the current volume of orders. Some im provement in demand was noted in M arch, but this was largely seasonal in character, such as autom otive buying. E xtension of existing prices for second quarter delivery has deterred speculative buying, and consumers in gen eral are said to be reducing stocks on hand. E xp o rt sales Iron and Steel STEEL INGOT CAPACITY MILLIONS OF TONS 1001----- UNITED STATES AND FOURTH D IS T R IC T U N ITED S TA TE S -V 1441I I I I I I I III I I I I I I I 3 have risen somewhat. P ig iron sellers have also begun booking second qu arter tonnage at unchanged prices, but they made no form al price announcement. Steelm aking scrap has continued to decline, w ith very little buying, and prices are largely nominal. Steel's com posite of steelm aking grades fell to $16.25 a ton late in M arch, the lowest since last September. T here has been little tonnage buying for domestic consumption, mill stocks being ample for cu rren t needs. Some scrap continues to move into export as ships become available. P ig iron output w as 2,950,618 gross tons in February, a drop in the daily average rate of twelve percent from January. A ctive blast furnaces dropped from 177 at the end of Jan u ary to 157 at the end of F ebruary. T he A m erican Iron and Steel In stitu te has recently pub lished data regarding steel ingot capacity as of the begin ning of this year. A nnual figures for the entire country from 1930 to date, together w ith the estim ated share of the national total accounted for by mills located in the fourth district, are shown in the accom panying chart. The capacity of this district in 1930, 1935, and the three years 1938 to date was compiled from In stitu te publications ; the intervening years w ere estimated. It is apparent that the Cleveland Federal Reserve D is trict provides roughly one-half of the total steelmaking capacity of the entire country, and that there has been little change in ingot capacity either in the fourth dis tric t or the rem ainder of the country in recent years. O ther areas expanded their capacity to produce steel in gots during the period from 1930 to 1935 by more than 20 percent, but the fourth district total rem ained p rac tically unchanged. L ast year total capacity of the coun try declined slightly as Bessemer furnaces were scrapped, but open hearth, crucible, and electric capacity was in creased. Bessemer capacity is now the lowest in 40 years. T he extensive m odernization program s carried out by sev eral producers from 1935 to 1938 had little effect on in got capacity, for the equipment installed at that time was largely in the form of continuous rolling mills and other fabricating machinery. Coal Bituminous coal production in the fourth district eased off slightly in F ebruary and early M arch, but was well m ain tained in the face of declining consumption of coal and coke by the steel industry. T otal output during F eb ru ary amounted to 14,212,000 tons, a decline of ten percent from F ebruary and about equal to th at of last December, but still 18 percent larg er than a year ago. Since output was reduced somewhat in F ebruary, pro ducers were better able to balance production of the v a ri ous types of coal w ith prevailing demand. L arge sales of heating coals in January, particularly in the case of do mestic grades, had resulted in accum ulation of slack and stoker coals, the demand for w hich was weak. P rices of these industrial coals, therefore, declined in January, but they recovered in F eb ru ary and M arch as output was cu r tailed and consumption rem ained relatively good. Expected prom ulgation of minimum mine prices under the Guffey Coal A ct to take effect some time this summer bar, had some effect in m aintaining mine operations recently. Coal producers report th at little stocking of coal is yet being done by industrial consumers, but expectation that prices may be higher than those now prevailing is said to 4 THE MONTHLY BUSINESS REVIEW be a factor in an unusually early movement of substantial quantities of coal to lower lake ports prior to opening of the navigation season. T his movement has been so large that some lower lake docks have become congested, and at least one railroad has em bargoed any further shipments to two of the ports it serves. Ice on upper lakes was said to be thinner than usual, and an early opening of the navi gation season was expected in F ebruary, but Lake E rie ports rem ained icebound through M arch. E xport trade, particularly Canadian, has shown im prove ment lately. Buyers from eastern Canada have requested substantial rail shipments prior to the opening of n avi gation. Sales to Europe and South A m erica, although somewhat larger than before the war, continue to be ham pered by lack of available bottoms and high shipping costs, as well as difficulty in arran g in g for payment in dollar balances. Automobiles Domestic production of passenger cars and trucks in F ebruary was larger than in any corresponding month in history, with the exception of 1929, and was an im portant element in supporting a relatively high volume of activity in many fourth district factories. P arts makers, tire m anufacturers, and glass factories benefited directly from this heavy vol ume of assemblies, and retail trade in many centers was supported by large payrolls in plants contributing to the automotive industry. Steel requirem ents in most cases, however, w ere met by draw ing on stocks accumulated during the fourth quarter of last year, and new orders for steel w ere nominal until m id-M arch. Despite reports of favorable retail sales during F ebruary, dealers’ inven tories of new cars and trucks were raised to record levels by the end of the month, and assembly schedules were stepped up less than seasonally in M arch. Shipments of parts, tires, and glass reflected this situation, showing little increase over F ebruary, although marked advances usually occur at that time. Automobile m anufacturers were said to be reducing stocks of parts and supplies somewhat earlier than in other recent years. In com parison w ith last year, total domestic output of cars and trucks during F ebruary showed a gain of 33 per cent. M ost of this rise was caused by expanded production of passenger cars, which, at 337,372 units, was 39 percent larger than a year ago, whereas truck assemblies, am ount ing to 66,255 units, showed a gain of only ten percent. E x p o rt trade in passenger cars was considerably smaller than a year ago, and although there has been some w ar buying of trucks, production of commercial cars for the foreign m arket in the first two months of 1940 was slightly low er than in the same months in 1939. D om estic m arkets were strong in February, with p re lim inary reports on passenger car registrations compiled by R . L . Polk and Company showing a less than seasonal drop of only 15 percent from the January level and a gain of 32 percent over F ebruary of last year. Retail sales in eight m ajor counties of this district were up more than the national average, show ing a gain of 63 percent. D e spite this favorable sales volume, production exceeded re tail deliveries, and dealers’ stocks w ere estimated at about 500,000 units early in M arch. T his was the largest vol ume in the history of the industry, and local banks re ported they had experienced some increase in dealers’ de mand for loans for the purpose of carrying inventories. Sales in the early part of M arch were less than expected, and dealers’ new car stocks continued to expand. T he number of used cars in the hands of dealers also at an all-time high early in M arch, although seasonal peak is ordinarily not reached until some in A pril. F eb ru ary sales, however, w ere also at an usually high level for that time of year. was the time un Robber, Tires Daily average crude rubber consumption in F eb ru ary fell six percent below the Jan u ary level, but it was still 13 percent greater than a year ago and more than tw ice as large as in 1938. Payrolls in Ohio tire factories also fell seven percent during the month, but employment w as off only slightly, and exceeded last year by 13 percent. In m id-M arch producers reported that schedules w ere being held at or above F ebruary rates. M aintenance of a relatively high level of activity in the rubber industry thus far in 1940 was attributed to heavy shipments of original equipment tires to automobile as sembly plants, desire of tire makers to accum ulate inven tories prior to seasonal expansioin in replacement sales, and sustained demand from truck and bus operators and from producers of tractors and earth moving equipment. M an ufacturers stated that a relatively large p art of current output was in the form of heavy tires, thus partially ac counting for the fact th at since last November the num ber of tires produced has not been as large as would have been indicated by the custom ary relation between crude rubber consumption and tire output. E xpanded produc tion of mechanical rubber goods was also a factor in this situation. In m id-M arch rubber companies reported that replace ment tire sales were about up to seasonal expectations, but that orders for mechanical rubber goods had fallen sharply to a level approxim ately equal to th at prevailing prior to outbreak of war. Sales of these products are said to follow general business conditions quite closely. T ire inventories had been built up considerably from the low level reached last fall. Textiles and Clothing T extile mills and clothing plants located in the fourth district continued to operate close to capacity through F ebruary, but by m id-M arch producers of worsted m aterials had com pleted w ork on spring lines. O rders w ere being taken for fall delivery, but m anufacturers were not planning to be gin production of fall fabrics until some time in A pril. Clothing plants, on the other hand, w ere still producing spring merchandise, and shipments continued heavy through the first half of M arch, with some deliveries carried over until after E aster. On M arch 1, employment at eleven Cleve land textile and clothing plants was the largest since 1935 as knitting mills and men’s w ear factories operated at u n usually high rates. E arly orders for fall fabrics w ere said to be about 40 percent lower than those received during the spring sea son ju st completed. M en’s clothing plants w ere still operating at capacity in m id-M arch in an attem pt to speed delivery of m er chandise ordered by retailers last fall. W eather conditions in F ebruary and M arch w ere not favorable to retail sales, however, and E aster volume w as disappointing. T he usual am ount of repeat orders for spring apparel, therefore, was not being received. M akers of men’s specialty clothing such as light w eight summer suits, w hich normally are THE MONTHLY BUSINESS REVIEW not sold at retail until late spring, were shipping the largest volume on record, and had sufficient orders 011 hand to assure capacity operations through mid-June. M en’s w ork clothing m anufacturers were also operating against back logs; they reported a falling-off of new business in M arch. W omen's w ear and m illinery plants thus far have ex perienced a disappointing spring season. Cold w eather com bined w ith an early E aster retarded spring apparel sales at retail, and dealers’ purchases have been held down in order to prevent accum ulation of burdensome inventories. Other Manufacturing O perating rates in most other manufacturing lines of im portance in the fourth district: were quite well m ain tained in F ebruary and the first three weeks of M arch, but in only a few cases was improvement in new business noted during this period. O perations w ere held at high levels because backlogs carried over from 1939 were still substantial, but in m id-M arch many m anufacturers reported that unfilled orders had been reduced to a minimum. Backlogs in the machine tool industry, however, have shown little reduction since last fall as orders from m anu facturers of airplanes and airplane motors have taxed the industry's capacity to furnish precision instrum ents. M akers of this type of m achinery, therefore, have continued to expand w orking forces and have placed substantial orders with each other for new machine tools. A t the present time, therefore, machine tool companies are among their own best customers. U nprecedented demand for precision tools has resulted in new production peaks being reached each successive month by many large producers, but plants not in a position to supply requirem ents of airplane m anu facturers and arsenals have curtailed operations lately and are w orking considerably below capacity. O ther types of heavy industrial equipment have not e x perienced this same large volume of business. O rders for foundry equipment, for example, fell off somewhat in F eb ruary, and backlogs w ere reduced as shipments exceeded new business. Sales of small tools, bolts, and nuts were also less than in January and continued to fall in the first half of M arch, but they were still well above the correspond ing period last year. T otal orders of electrical equipment m anufacturers, on the other hand, rose in February. E x pansion program s of the utility industry were partially re sponsible for this increase, but sales of consum ers’ goods, such as refrigerators, rose sharply. M anufacturers’ sh ip ments of w ashing machines during F ebruary were the second highest in history for that month. Office equipment m anufacturers reported a sustained level 5 of operations in F ebruary and the first half of M arch, with a slight pickup in new business recently. O rders have con tinued to exceed production, and backlogs are larger than those accumulated during last fall’s period of speculative buying. Domestic sales are considerably higher than a year ago, more than offsetting loss of foreign m arkets resulting from the war. New business of paper and paperboard producers has generally declined since last September, but there was some increase in sales of fine w riting papers early in M arch. Paperboard prices have weakened recently, following re ductions in prices of waste papers. Soon after outbreak of w ar last fall these raw m aterial costs rose sharply, re sulting in a sim ilar advance in paperboard and box prices, but with the declining demand for most paper products, waste paper prices fell, and prices of finished products now reflect lower raw material costs. P rices of imported pulps, on the other hand, have risen somewhat recently. Sales of boxes were at a seasonal low point in M arch, but customers were accepting deliveries on orders placed e a r lier w ith few requests for delayed shipments. Production of most types of glass products declined in F ebruary as orders remained low. Plate glass output fell to 13,175,000 square feet, a drop of 24 percent from J a n u ary, but still 30 percent above a year ago. W indow glass output also fell more than 20 percent from the unusually high January level, but part of the drop was caused by shutdowns pending settlement of an industrial dispute. D e spite this curtailm ent, total window glass production was only five percent lower than the average monthly total in the fourth quarter last year. In mid-M arch m anufacturers reported a greater than seasonal drop in orders for plate glass, and the usual spring pickup in window glass sales had not yet occurred. Both production and shipments of plate and window glass ex ceeded orders, and backlogs which had been substantial at the beginning of the year no longer existed. M anufac tu rers’ inventories were being built up, but producers es tim ated that the rate of increase in stocks was approxi mately equal to the rate at which dealers and consumers were liquidating supplies purchased last fall. Glassware and glass container divisions also reduced op erations in F ebruary, but output was at or above the level of last year. D innerw are plants, however, reported an in crease in new business during the first half of M arch, following a more than seasonal drop in January and F eb ruary which had reduced sales below the level of 1939. O perations were expanded to about 75 percent of capacity in m id-M arch in response to the pickup in sales. Shoe production in the fourth district rose somewhat in F ebruary and early M arch as w ork on spring lines p ro gressed, but new business reflected disappointing retail sales, and in m id-M arch some companies reported they were nearing the end of their spring season earlier than usual. O utput of fourth district shoe factories in January and F ebruary was slightly less than production during the same two months last year, arid the volume of orders 011 hand near the end of M arch indicated a further decline before the close of the spring season. TRADE R e ta il N early all national indexes of retail trade show th at sales failed to make their usual gain in February. T he index of departm ent store sales compiled by the Board of Gov 6 THE MONTHLY BUSINESS REVIEW ernors of the Federal Reserve System declined two points to 90 percent of the 1923-25 average, and indexes of rural retail trade and variety chain store sales compiled by the Department of Commerce also showed less than seasonal advances. In this district, the seasonally adjusted index of department store sales fell only six-tenths of one point to 92.7 percent of the 1923-25 average. In comparison with a year ago, however, daily average sales were up three percent. Without allowance for difference in the number of shopping days, department store sales in the fourth district were ten percent larger than a year ago, retail furniture sales were up 22 percent, and wearing apparel shops reported a gain of six percent. Chain drug sales were up only four percent. Chain grocery firms reported a rise of 15 percent in average sales per store operated, but this advance is partly due to concentration of opera tions in larger units instead of actual increases in the volume of merchandise handled. Part of these gains in dollar sales volume, as compared with last year, is due to somewhat higher retail prices. Fairchild Publications states that average retail prices ad vanced for the eighth consecutive month in February, and on March 1 they were nearly four percent higher than a year previous, but still four percent lower than the 1937 peak. Department store inventories rose sharply in February, and the seasonally adjusted index of department store stocks advanced to the highest level in two years. This increase in the index, however, may be due to inability to make proper allowance for the unusually early occurrence of Easter, which apparently caused department stores to build up stocks of spring merchandise in February rather than in March. Results of the Easter shopping season were quite unsat isfactory as cold weather which prevailed through most of March retarded sales of spring merchandise. In com parison with the same weeks last year, sales in the first three weeks of March showed marked gains, but they were approximately ten percent below those of corresponding pre-Easter weeks in 1939. Wholesale trade in the fourth district during February was well maintained in the face of seasonal factors and the gen eral decline in industrial activity, and total sales of 221 firms reporting to the Department of Commerce fell only five percent from the January level. As shown in the table on page seven, dollar volume was twelve percent larger than a year ago. Comparisons with 1939 ranged from a gain of 64 percent in sales of machinery and supplies to a loss of six percent in the case of clothing and furnish ings dealers. Purchasing policies of most wholesalers were conserva tive in February, there being almost no change in stocks of merchandise in the hands of grocery firms and several other groups. Increases in stocks of automotive supplies, paints, drugs, and dry goods, however, raised total stocks of the 110 firms reporting inventory data by three per cent. Nevertheless, at the end of February they were less than seven percent larger than a year ago, whereas a month earlier a similar comparison showed a gain of nearly ten percent. Wholesale CONSTRUCTION Private construction activity in the fourth district in creased in February, but there were few public projects started, and the total volume of construction begun dur ing the month was the smallest in nearly two years. Total contracts awarded, according to the F. W. Dodge Corpo ration, amounted to only $18,590,000, a decline of 25 per cent from January, and 18 percent less than in February of last year. Private work, however, showed a gain of about 20 percent over both January and the corresponding month last year. The increase in private construction during February occurred in both residential and nonresidential building. Commercial building in western Pennsylvania and factory building in northern Ohio rose from their low levels of the preceding month, and commercial and factory building in western Pennsylvania, Ohio, West Virginia, and Ken tucky totaled $4,700,000, which was more than twice the amount begun in February 1939. In comparison with the amount of these types of buildings erected several years ago, however, the present volume is quite small, totaling only one-third of the 1928 monthly average. Private residential building picked up slightly more than seasonally from the low January level as both speculative builders and home owners expanded operations after the extreme cold prevailing in the first few weeks of the year. The total value of one- and two-family houses on which construction was started during February was 20 percent larger than in the corresponding month a year ago, whereas the January figure showed little gain over 1939. It was the largest February since 1930. AGRICULTURE There was little change in important farm prices in February and the first three weeks of March. Hog prices fluctuated at about the low level of last August, to which they had returned after a speculative spurt in September, and were considerably lower than a year ago. Wheat and corn prices were realtively stable at levels not far from peaks reached last December when unfavorable domestic weather conditions, combined with reports of less-than-expected foreign production, raised prices sharply. Prices of beef cattle advanced, but they were still below those of last year at that time. Farmers in this district plan to reduce acreage of com, oats, and tobacco this year, but to expand the amount of land devoted to soy beans and barley, according to reports sub mitted to the Department of Agriculture on or about March 1. At that time Ohio farmers expected to curtail acreage of corn six percent, oats seven percent, and burley tobacco eight percent. Kentucky tobacco growers planned to reduce acreage only five percent under the A.A.A. pro gram, but the total of all types of tobacco grown in the United States will be reduced 22 percent if present expec tations are carried out. Soy bean acreage in Ohio will rise 35 percent; for the first time it will exceed the amount of land planted to oats. This expansion is due to greater use of domestic beans in the growing plastics industry, as well as to substitution of the fodder for other types of hay, and recognition of its soil-conserving qualities. Prospective Plantings THE MONTHLY BUSINESS REVIEW Wholesale and Retail Trade Debits to Individual Accounts (1940 compared with 1939) Percentage Increase or Decrease SALES February 1940 + 9 .9 4*15.3 + 1 0 .0 + 1 0 .3 +6.6 + 7 .7 + 1 1 .2 — 1 .2 + 9 .1 + 9 .7 DEPARTMENT STORES (52) Akron................................................................ Cincinnati......................................................... Cleveland......................................................... Columbus......................................................... Erie.................................................................... Pittsburgh........................................................ T o le d o .:;........................................................ Wheeling........................................................... Other Cities..................................................... District............................................................. WEARING APPAREL (12) Cincinnati......................................................... + 8 .2 Cleveland.......................................................... + 1 0 .1 Pittsburgh........................................................ + 4 .0 D istrict.^......................................................... + 5 . 7 FURNITURE (39) Cincinnati......................................................... + 2 7 .1 Cleveland.......................................................... + 3 4 .2 Columbus.......................................................... —12.2 Dayton.............................................................. + 1 . 4 Toledo............................................................... + 1 8 .6 Other Cities....................................... .............. + 2 2 .5 District.............................................................. + 2 1 .5 CHAIN STORES* Drugs—District (5)........................................ + 4 .2 + 1 4 .2 Groceries—District (4).................................. + 1 4 .8 WHOLESALE TRADE** + 3 1 .6 Automotive Supplies (9) ............................. + 1 9 .1 + 3 .4 Beer (7)............................................................ + 6 .5 — 1.8 Clothing and Furnishings (6)...................... — 6 .0 + 5 .8 Corfectfonery (4)............................................ + 1 5 .8 + 8.6 + 9 .1 Drugs and Drug Sundries (7)...................... + 1 5 .3 Dry Goods (4)................................................ + 1 2 .6 + 2 3 .4 Electrical Goods (15).................................... + 2 6 .8 + 2 .3 Fresh Fruits & Vegetables (8).................... —0— + 9 .4 Furniture & House Furnishings (3)............ + 2 2 .0 + 7 .7 Grocecy Group (51)....................................... + 8 .4 + 1 5 .8 Total Hardware Group (39)........................ + 1 7 .7 + 3 .2 General Hardware (8)............................... + 0 .6 + 3 3 .2 Industrial Supplies (16)............................ + 3 9 .0 + 1 9 .6 Plumbing & Heating Supplies (15)........ + 2 0 .8 Jewelry (3)...................................................... — 5.1 — 3.1 Lumber and Building Materials (5).......... — 1. 4 + 5 2 .0 Machinery, Equip. & Sup. (4).................... + 6 3 .9 + 1 4 .2 Meats and Meat Products (5).................... I*11-? + 2 7 .3 Metals (3)........................................................ + 3 0 .8 + 1 4 .1 Paints and Varnishes (6).............................. + 4 . 3 + 1 3 .9 Paper and its Products (7).......................... + 1 1 ? + 7 .4 Tobacco and its Products (16)................... + 9 .2 + 1 9 .8 Miscellaneous (17).......................................... + 1 9 .1 12.0 District—All Wholesale Trade (221).......... + 1 2 .1 ♦Per individual unit operated. ♦♦Wholesale data compiled by U. S. Department of Commerce. *Not available. Figures in parenthesis indicate number of firms. + Akron........ Butler.................. Canton................ Franklin.............. Greensburg......... Hamilton............ Homestead.......... Lexington............ L im a:................. Lorain................. Middletown........ Oil City.............. Pittsburgh.......... Sharon................. Springfield.......... Steubenville........ Toledo................. Warren................ Wheeling............. Youngstown___ Zanesville............ — 4 .8 + 3 7 .5 100) Bank debits (24 cities) Commercial Failures (Number). (Liabilities). Sales—lif e Insurance (O. and Pa.)........ —Department Stores (48 firms). . . —Wholesale Drugs (7 firms).......... — ** Dry Goods (4 firms).. — ” Groceries (51 firms)., — V Hardware (39 firms). — All (101 firms).......... —Chain Drugs (4 firms)**. Building Contracts (Total). Prod«ctkm - ^ I ( 6 .,W .^Pa.fe.K^.). ” —moment v"., “ •* a., u. ivy.;. . . . —Elec. Power (O., Pa., Ky.)*.. . . ♦January. **Per individual unit operated. (Thousands 4 Weeks % ended change March 20, from 1940 1939 + 5 .6 61,376 8,612 + 8 .6 34,721 + 1 1 .8 + 6 .4 304,629 530,670 + 1 4 .9 181,243 + 8 .2 + 9 .4 63,959 26,053 + 7 .2 2,737 + 1 2 .0 6,374 + 4 .4 10,082 + 2.7 2,937 + 1 2 .7 18,644 + 0.1 12,653 + 1 1 .9 4,682 + 6 .9 10,982 + 1 6 .9 9,542 + 5 .6 + 1 5 .5 650,755 7,338 + 4 .7 + 2 .2 16,303 9,131 + 9 .7 117,945 + 1 3 .2 9,490 + 1 7 .0 22,954 —17.8 43,895 + 1 1 .0 7,597 + 0 .8 2,175,304 + 1 1 .5 of Dollars) Year to Date Year to Date % Dec. 28,1939 Dec. 29,1938 change to to from Mar. 20,1940 Mar. 22,1939 1939 189,692 + 1 2 .2 169,076 26,858 23,033 + 1 6 .6 104,434 88,795 + 1 7 .6 914,966 850,765 + 7.5 + 1 4 .3 1,663,059 1,454,393 493,389 454,130 + 8 .6 191,422 169,410 + 1 3 .0 79,589 70,150 + 1 3 .5 8,952 7,164 + 2 5 .0 21,763 18,122 + 2 0 .1 30,663 28,634 + 7.1 + 1 6 .7 8,808 7,549 88,798 84,954 + 4.5 41,656 34,177 + 2 1 .9 14,171 12,457 + 1 3 .8 34,115 26,796 + 2 7 .3 30,411 25,933 + 1 7 .3 1,971,301 1,681,524 + 1 7 .2 23,729 21,273 + 1 1 .5 47,099 45,790 + 2.9 + 1 4 .0 27,007 23,693 350,612 308,621 + 1 3 .6 28,383 23,350 + 2 1 .6 — 8.2 74,492 81,106 111,758 + 2 5 .6 140,339 23,368 + 7.5 21,729 + 1 3 .4 6,629,076 5,844,382 t ++ 1 86.1.5 + 1.1 — 1 .7 1 + 9 .9 + 5 .2 + 3 .3 + 4 .8 + 1 3 .4 l i + 1 4 .5 + 12.8 + 1 3 .8 —10.9 + 4 .4 + 6 .7 Feb. Feb. Feb. Feb. 1940 1939 1938 1937 67 64 81 79 38 41 66 36 63 21 18 27 69 80 88 78 71 70 82 73 98 110 116 106 35 46 41 49 62 63 73 67 76 57 56 67 61 61 73 68 86 93 95 91 48 37 30 39 34 41 26 49 66 51 88 79 31 15 19 187 199 236 204 116 114 115 120 125 122 120 122 Fourth District Business Statistics (000 omitted) Fourth District Unless February % change Jan.-Feb. % chans*, Otherwise Specified 1940 from 1939 1940 from 1939 + 1 6 .3 Bank Debits—24 cities................ $2,150,000 + 1 7 .7 $4,587,000 Savings Deposits—end of month: 40 banks, O. and W. P a .............$ 790,255 1.2 Life Insurance Sales: —14.6 Ohio and Pa................................$ 74,970 — 2 .6 155,262 Retail Sales: 35,034 +10 3 Dept. Stores—52 firms..............$ 17,585 + 9 .7 + 3.7 Wearing Apparel—12 firms... .$ 1,345 649 + 5 .7 + 1 6 .7 1,341 Furniture—39 firms.................... $ 749 + 2 1 .5 43,433 —13.2 Building Contracts—Total.......... $ 18,590 —18.2 ” ” —Residential. $ 8,350 + 1 7 .3 22,543 + 4 6 .6 Commercial Failures—Liabilities.$ 940 + 2 0 .7 1,770 —20.9 1181 —24.8 ” —Num ber.. 531 —18.5 Production: +54. 4 Pig Iron—U. S............Gross tons 2,948 + 4 3 .1 6,541 Steel Ingot—U. S........Net tons 4,375 + 3 0 .7 + 4 4 .8 9,994 700,1081 + 3 3.5 Auto—Passenger Car—U. S........ 337,3721 + 3 8 .8 + 1 2 .2 Auto—Trucks—U. S .................... 66,2551 + 1 0 .0 135,6201 Bituminous Coal, O., W. Pa., + 2 2 .1 30,142 E. Ky..................................tons 14,212 + 1 8 .4 Elec. Power, O., Pa., Ky. 1,9862 + 1 6 .2 .............................. thous. k.w.h. 2,1122 — 0 .3 Petroleum—O., Pa., K y ....b b ls. 8 s — ii2 + 3.0 Shoes .................................... pairs + 1 3 .7 9,887 4,911 + 1 6 .0 Tires, U. S..........................casings 1actual number 3January •confidential + Fourth District Business Indexes (1923-25 7 Feb. 1936 70 58 50 82 70 93 41 66 56 63 90 28 14 81 12 174 109 117 8 THE MONTHLY BUSINESS REVIEW Summary of National Business Conditions By the Board of Governors of the Federal Beserve System INDUSTRIAL PRODUCTION In d e x o f p h y sic a l v o lu m e o f production* a d ju ste d fo r s e a so n a l v a r ia tio n , 1923-25 a v e r a g e = 100. D u ra b le m a n u fa c tu r e s, n o n d u ra b le m a n u fa c tu r e s, a n d mineral,n e x p ressed in te r m s o f p o in ts in t h e to ta l in d ex . B y m o n th s, J a n u a r y 1934 to F e b ru a ry 1940. L a te s t figu res— T o ta l 109; D u r a b le 41.3; N o n d u ra b le 50.8; M in erals 17.4. FREIGHT CAR LOADINGS In d e x o f t o ta l lo a d in g s o f re v e n u e fr e ig h t, a d ju s te d fo r s e a s o n a l v a r ia tio n , 1923-1925 a v e r a g e = 100. M iscella n e o u s, c o a l, an d a ll o th e r ex p r e sse d in te r m s o f p o in ts In t h e t o t a l in d ex . B y m o n th s, J a n u a r y 1934 t o F eb ru a ry 1940. L a t e s t figu res— T otal 73; C oal 14.3, M iscella n e o u s 39.6; A il O ther 19.1. WHOLESALE. PRICES •334 1935 1936 1937 In d e x co m p iled b y t h e U n ited S ta te s B u r e a u o f L a b o r S ta tis tic s , 1926 = 100. B y w e e k s, 1934 to w e e k en d in g M arch 9, 1949. L a t e s t figu re— 78.3. MONEY RATES IN NEW YORK CITY For w eek s e n d in g J a n u a r y 6, 1934, to M arch 16, 1940. Industrial activity showed a further sharp decline in February and a less marked reduction in the first half of March. Wholesale commodity prices generally were steady, following some decline in January and early February. Production In February the Board’s seasonally adjusted index of industrial pro duction was 103 per cent of the 1923-1325 average as compared with 119 in January and 128 in December. A further decline at a slower rate is in dicated for March on the basis of data now available. In August 1939, the month prior to the outbreak of war, the index was 103. Steel production, which had risen sharply in the latter part of 1939 and then decreased considerably in January, showed a further marked reduction in February to 69 per cent of capacity. In the first half of March output was steady at a rate of about 65 percent. Plate glass pro duction declined further in February and output of lumber, which had dropped sharply in January, showed less than the usual seasonal rise. Automobile production in February was maintained at the high level pre vailing in January. Dealers’ stocks of new cars rose to high levels in this period, notwithstanding the fact that retail sales of cars were in large vol ume for this time of the year. In the first half of March output of auto mobiles showed less than the customary sharp increase. In some indus tries not included directly in the Board’s production index, particularly the machinery, aircraft, and rayon industries, activity continued at high levels. Changes in output of nondurable goods were largely seasonal in Febru ary except at textile mills and sugar refineries. At cotton textile mills activity declined somewhat from the high levels prevailing since early last autumn. Activity at woolen mills, which had decreased considerably in December and January, declined further in February and output of silk products v/as reduced to an exceptionally low level. Sugar refining showed less than the sharp rise usual at this season. Mineral production declined in February, owing chiefly to a consider able reduction in output of anthracite. Bituminous coal production de clined somewhat, following a rise in January, while output of crude petro leum increased to new high levels. Value of construction contract awards in February showed little change from the January total, reflecting a further decrease in contracts for public construction and a contraseasonal increase in private contracts, according to figures of the F. W. Dodge Corporation. Distribution Retail distribution of general merchandise showed little change from January to February and remained somewhat below the high level of the latter part of last year, with due allowance for seasonal changes. Sales at variety stores and mail-order houses showed about the usual seasonal rise in February, while at department stores, where some increase is also usual at this time of year, sales remained at about the January level. Freight-car loadings declined considerably from January to February, reflecting for the most part a sharp reduction in coal shipments and some further decrease in loadings of miscellaneous freight. Foreign Trade Exports of United States merchandise in February declined less than seasonally from the bis:h levels reached in December and January. The principal decreases were in shipments of cotton, copper, and aircraft, which had been exceptionally large in previous months. Exports to Japan fell sharply and there were declines also in shipments to the United Kingdom, the Netherlands, and Russia, while exports to Belgium and the Scandin avian countries increased. Commodity Prices Prices of nonferrous metals advanced from the middle of February to the middle of March, while steel scrap and textile materials declined some what further. Most other commodities showed little change and in the week ending March 9 the general index of the Bureau of Labor Statistics was at 78.3 per cent of the 1926 average as compared with 78.5 a month earlier. Government Security Market Following a relatively steady market during February, prices of long term Treasury bonds increased sharply after the announcement by the Treasury early in March that its operations during that month would be limited to the issuance of a five-year note to refund a note maturing next June. Bank Credit Total loans and investments at reporting member banks in 101 leading cities rose during the six weeks ending March 13, largely as a result of increases in investments at New York City banks. Following a reduction during January, commercial loans increased, mostly at banks in cities outside New York. Bank reserves and deposits continued to increase during the period.
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