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MONTHLY REVIEW OF Business and Industrial Conditions in the New England District B., Frederic H. Curtia■• Chairman and Federal Reserve A11ent FEDERAL RESERVE BANK OF BOSTON Vol. I BosToN, MAss., December 26, With no important curtailment of production on account of the coal strike, for the reason that reserve supplies had not been seriously invaded before the settlement of the difficulty, and through the installation of fuel oil systems in many large plants, the year closes with New England industries stimulated by post war conditions to a degree of peace-time activity unparalleled in the economic hi~tory of this section; wages advanced to rates hitherto undreamt of and commodity prices at corresponding levels ; and labor at the moment quiescent. While there has been, no doubt, considerable saving from earnings as evidenced by large aggregate deposits in savings institutions and investments in government obligations, nevertheless no one may observe without a feel ing of apprehension the manner in which the enhanced purchasing power of the wage-earners is being dissipated by irrational personal expenditures, especially when it is beginning to be coupled with requests for credit at retail ston:s by many who have never before known the meaning of a charge account. The readjustment of rediscount rates by the Federal Reserve Banks was undertaken with a view to modifying the situation of which these conditions are a reflex, but this will not furnish the complete remedy. Indeed, not until some powerful influence is brought to bear upon the machinery of production to establish a more normal relationship between the quantity of necessities and of luxuries respectively offered for consumption, will it be possible to accumulate the wealth necessary to pay the cost of the war as represented by the enormous debts of the nations, and to bring about a return to normally healthy social conditions. It is unlikely however, that any reduction in the cost of living will be forced upon the consumer by the voluntary benevolence of the makers of goods; it is certain that it will not come about through legislation any more than it was vouchsafed the people of Rome in 301 A. D. by the Edict of Diocletian; and if it comes otherwise tha!1 by a collapse of the existing economic 1919 No. 12 structure such as would bring, not reduced prices only, but reduced earnings and widespread distress, it can come only through individual sacrifices, foresight and initiative, manifested by restricted expenditure and conservation of savings beyond anything yet apparent. M The money market for the month ooey of December has shown the usual seasonal increased demand for money, being accentuated by continued Government financing, increasing costs of labor and raw material, and continued business activity. Commercial rates have been increasingly firm, 6 per cent. being the ruling rate for all maturities, shading of that rate being the exception. The payment to the Boston & Maine Railroad of about $30,000,000 by the United States Railroad Administration on December I somewhat eased the local money market for a few days, but the withdrawal of government funds in depository banks soon took up the slack. The banks in this district have for the most part during the month confined their commitments to their own customers. Three issues of Certificates of Indebtedness have been offered by the Treasury Department, and as these were largely paid by credit or by exchange of other certificates there has not been any marked effect from this financing. The payment of Federal taxes on December I 5 in this dist rict amounted to approximately $95,000,000 at the date of this letter and was partly anticipated by Treasury Certificates, but these payments, together with government withdrawals, have caused member banks to replenish their reserves at the Reserve Bank to even a greater degree than in previous years. Savings bank loans for six months and for a year are 6 per cent.brokers' call loans 6 per cent. to 8 per cent., affected by the New York call rate, 8 per cent. predominating,- prime bankers' acceptances S per cent. to S¼ per cent. for 90 days, with ¼ per cent. to ¼ per cent. differential for shorter maturities. On December 12 the Federal Reserve Bank raised its rates on loans, its Liberty Bonds and Victory Notes, to 4¾ per cent., bringing loans of that character on a parity with commercial loans. While with the approach of the new year sentimentally money may be firmer, on the other hand the general banking situation would appear to be fully as comfortable as during the month of November. The general labor situation at the Labor present time throughout New England is satisfactory ; mills are running to capacity, labor is scarce and wages high, but with the latter, in many cases but recen tly increased, there exists almost universally a condition of more widespread tranquilityandabsenceof strikes than has existed at any tim e before during the year. The shadow of another great textile strike, involving 70,000 operatives in New Bedford and Fall River, and ultimately, no doubt, most of the remainder throughout New England, which loomed large the first week in December because of the refusal of the manulacturers to grant a demand for 25 per cent. increase in wages, passed quickly. Some of the mill men felt the time was propitious for a tryout of the strength of their employees and were disposed accordingly to yield nothing; others could not turn aside the prospects of continued profits from production uncurtailed ; the result was a compromise offer of a 1 2 ¼ per cent. increase, which was accepted. Peace may therefore be confidently expected to reign in this industry for at least the duration of the new contract - six months. . The larger department houses Retail Trade for two months past report an appreciable increase, not only in the money volume of business, but in the number of actual sales transactions. Prices are in many instances still ascending, though on some commodities they appear to have remained fairly stationary. The effect upon prices of women's ready-to-wear apparel of the great increase in wages received by the garment workers in New York City is noticeable, there being more complaint of high prices in this line than formerly. Women who have been in the habit of paying from $25 to $35 for a coat, suit, or dress, and who now find the same merchandise marked at more than double these figures, show a perceptible inclination to desist from purchasing, preferring to make their own garments or have them made by a private dressmaker; such customers have accordingly diverted their purchases to yard goods and findings, buying silk, cotton and woolen dress goods and materials for making up into needed garments, - and departments handling these classes of merchandise have experienced a wonderful increase in sales, while the garment departments have been sagging. If this tendency continues, the high prices of ready made garments should, in time, drop automatically, for stores will not long keep stocks at prices which will not move them. In the textile centres where the operatives were enjoying the highest wages on record even before the recent increase, the business of the retail stores continues enormously stimulated; nevertheless retailers and bankers express the belief that the peak of high prices for most commodities which enter into living expenses has been reached. In the Government wool Wool and sales this month the demand Woolen Goods for fine grades continued and every pound of the Cape wools offered was sold ; eastern dealers have, furthermore, commenced to buy fine wools in the far West, which will not be shorn until the latter part of March at the earliest, the total purchases of unshorn western wool being estimated at between two and three million pounds. Prices are strong for yarns and tops, which are difficult to secure, and the combers and spinners are quoting prices in many cases which are intended as insurance against possible contingencies. The cause of high raw material prices is largely, no doubt, the restricted supply, for which the limited offerings of the British government are in part responsible, but this factor, despite the economic theory that the price of raw material regulates the price of the finished product, cannot be said to be exclusively responsible for the prevailing prices of the manufactured article, since the amount of machinery and labor available at the present time for production, as well as the abnormal demand for the most expensive goods, are very important and direct elements in the situation. In fact the extreme high level of the fine wool market today, many think, may be traced directly to the high wages paid to mill operatives and the position which they are thus in to buy clothing made of smooth feeling wools, and manufacturers are for the most part accordingly sold for months ahead at high prices chiefly for an output of fine fabrics, woolen and worsted spindles being at their highest points of activity for the year. And yet, notwithstanding this situation, some hopeful indications of an increasing demand for wools of lower grades are beginning to appear. Manufacturers of fine cotCotton and ton fabrics seem to be more Cotton Goods or less at sea with regard to the policy to be pursued with respect to taking on new business at this time, and to differ widely in their views as to what the future is likely to bring forth. Some have been courageous enough to take orders for deliveries as far into next year as August and September, others will not contract beyond six months, while the more conservative, having sold practically their entire anticipated output of fine fabrics for the first quarter of 1920, are not pressing for further orders on the basis of current prices for the raw material, nor are they anxious to stock up on the latter under the circumstances without being certain of their ability to cover any purchases made with sales of the product later on. The possibility of a slump in commodity and raw material prices is a constant spectre before the cotton manufacturer in this period when it is so difficult to forecast the future. Meantime the demand for goods continues, reflecting not merely the continued purchasing power of the public, but its apparently unwhetted appetite for the finest fabrics which money can buy; and while threatened curtailed production because of a great strike of textile operatives in New Bedford and Fall River has happily passed and no present embarrassment is being felt by the mills on account of coal shortage, these contingencies were not necessary to produce bids for goods at such prices as to make it impossible for all manufacturers to withstand the temptation to accept orders in spite of the risks involved for commitments far into the future. A general increase of 12 ½ per cent. in wages was the immed iate result of the demonstration of the New Bedford operatives the first of the month, with consequent stabilizing of the labor situation in this industry for at least another half year. Tanners throughout New England Leather are inclined to be rather cautious and Shoes respecting further commitments for the immediate future. Prices on goatskins used in the manufacture of women's fine shoes continue to soar to higher levels and are practically four to five tim es the pre-war price, and while the demand is not quite so active as it was a month or six weeks ago, it is still apparently sufficient to sustain the market. Factories are running at full capacity on spring orders, of which they have a sufficient supply to keep them occupied for weeks, and in some cases months, to come. Agents of large manufacturing concerns operating their own chains of retail stores continue to increase their orders for spring delivery, not only at greatly enhanced money values, but also in quantities representing proportionate increases in unit pairs. But while no early reduction in the cost of footwear can be foreseen,- and, indeed, on the basis at which retailers have been buying stock even higher prices may be expected on some lines next spring,-it is evident that the public is beginning to do what it should have done long ago - shop around and see where it can get the best values, and also to be satisfied with better wearing but less fancy lines. This aspect of the situation is finding some authoritative encouragement from the manufacturers themselves in suggestions put forth at a recent meeting of the Allied Council of the American Shoe and Leather Industries for the limitation of styles and the use of coarser and more durable, but cheaper, grades of leather, so as to effect a greater turnover and reduction of basic costs. The enormous increases in wages, aggregating in some processes 100 per cent. above the prevailing rates of three or four years ago, coupled with a decrease in the working hours of 20 per cent., are responsible both for the absence of serious labor troubles in this industry for some months as well as in part for the high prices to the consumer. The sulphite producers in Pulp and Paper New England are reported well provided with pulp wood, but far-sighted men in this industry believe that unless a comprehensive program is initiated at once for the reforestation of potential lumber land, twenty years will see an exhaustion of the pulp wood supply. The demand for sulphite, the product from pulp wood, seems to have reached a point where all of the production of the pulp mills, not only in the New England States, but some in Canada, is taken up. The foreign sulphites, which were very prominent in the domestic markets prior to 1914, are now becoming available in good quantities, and Candian interests shortly expect to put more than 300 tons of bleached sulphite daily on the market. The Scandinavian sulphite producers are endeavoring to enter this market and are asking a premium based on quality, but leading New England manufacturers are not willing to admit that any of the foreign sulphites are superior for paper making to the domestic product. Generally speaking the demand for papers favors the lower priced grades of bonds and writings, though that for the better grades is showing improvement. Demand for book papers and sulphite wrappings is such that mills running on these lines are generally booked well ahead on both domestic and foreign tonnage, a condition which is affecting prices to an extent that higher levels will prevail undoubtedly during 1920. News print paper is scarce and high in price; there is a good demand at high prices for mixed papers; box board mills are doing a good business with prices firm and steady. Cleariall House Banke ia the larller citiee ia tbia diatrict ew Coa tructioa l11ued ia Buildiait Permit• for hpon t~e f•llowlaa: c.Uriu aplut thdr Jod.i,iduJ depo,llon' ICCOUllt the Leadiall Citie of tbi1 Di trict 1 1919 j ANUAP.Y No. PctDlill -· TO No. Permlct Aat0u.nt 79 1,40? 116 2S♦ 91 ♦ . 621 l.aW'rtACC 298 Lowell LJaa 491 Man<l,attJ in 608 870.610 l,S27,2S2 1.060,478 Z.l-01 ,460 1,111.986 1,271.ll6 S.-126.ISO l!l 9-4 Hartford 220 787 1.046 !47 7.! 19. ♦12 w;, l.S72. IB HD !74 N..., lledfonl . New Hin, Portlln4 5priAJ6tld -.. 962 1.14 w........ Total Oul11da Boston, Total 7,<Mll 1.1<1 181 2♦ 1 H9 $34,265,757 14,770.116 --- 12. '1'1 Sll,039 47,791 96,472 16,079 22,998 36,234 72,63S 29,881 16S,17S 78,411 30,841 92,072 $701,627 1,362,16S $2,063,792 17. '19 $12,712 46,SOS 89,878 15,416 28,972 40,721 69,897 32,310 161, 618 70,016 32,SS4 73,881 $674,8S0 1,424,291 Bangor, Me. Fall River, Mats. Hartford, Conn. Holyoke, Mass. Lowell, Mass, New Bedford, Mass, New Haven, Conn. Portland, Me. Providence, R . I. Springfield, Mass. W aterbury, Conn. Worceater, Mas,. - 114 617 e;, , 122.00s + m ♦90.196 + 86 19 1. 72♦ + 149 l,Sll,9-12 + t!O t,5S9.971 12 816, 7-18 + 17S 67.488 +1 m ll1,18S + 861 71'1.lll + 611 2.IU.166 + IM 400.117 + 192 695.91! +-!-01 t.27!,889 + ?♦ 6 128 4,-l-09,117 8,&44 $49,035,873 : l!adlo r No,. Dec. Amount Cbanre 109 209 l. ♦11.8 1 1 Paar Weck, Enclior FourWttlcJ 1918 ll-1 F•II kf.-er 1-ltchbarr (In ' I b o - of DC>llan) D ECEMBER 1 Total outaide ofB01toa 3,218 $10,888,410 + 214 l.911.61; + 2n HO -----3,668 $14,802,047 + 231 Boston $2,099,141 Total aU Citiea • -- - - -- Condition of Forty-four Selected Member Banks (In T bou.undt of Doll.re) ... Tweat,- Bank, ia Bo1toa Twent y-four Ban•• ouu.ide of Boetoa llcc.19 1919 S24, 632 16, 330 H,272 2S2 ,8S9 H,295 17S,844 87, 7S6 12,090 U. S. Bonda and ote1 . U. S. Certi6catea Loan• aecured by U. S. obliirations, Other loans and investments Rcaervc Federal Reserve Bank et Demand Deposits Time Dcpoai Government Deposits ...... 21 1019 24,967 13,076 13,S94 246,S46 1S,831 177,SJO 87, lSS 4,016 Un:. 20 191 :$20,343 17,S99 26,251 233,373 13,797 162,110 72,780 IS, 796 %c 1g 1919 S9,42S 31,271 28,879 S92,674 60,800 S68,424 39,900 29,767 21 1919 $9,904 17, J9S 26,734 602,486 60,849 584, 9S8 36,632 11,367 II«. In Jet:r + 21. 08 - 7.22 - 4S . 64 2.S6 3. 60 1.47 20. 57 - 23. 47 + + + + N... Dec. 20 191 SIS,897 49,808 76,717 S24,843 63,936 SS2,848 24,836 44,780 % Cbanre lnrnr 40. 72 37.22 62. 36 12. 92 4. 91 2.11 60.6S - 33.SJ - + + + Statement of Condition of the Federal Reserve Bank of Boston (la Tbounnd, of Do11an) LIABILITIES RE OURCES 10, •19 No•. 21, •19 S89,S6S S9S,247 Gold lteservc against F. R . Notes, 56,123 42,86S Gold Reae"e against Deposits, 152,070 132,430 Total Gold . S,108 3,72S Lqa1 Tender and Silver 155,795 137,538 Total 127,078 134, 324 Diacount, secured by U. S. Sec., 32,763 49,SS9 Discounu - Commercial Paper so, sss Banlr.era Acct. bolJibt in open market, H,41 2 21,436 U.S. Sec. pledged to secure circulation, 21 ,436 701 1, 552 Other U. S. Securities owned 220,432 233,384 Total Earoia, A11eh . 79,290 9S,697 Uncollected Items 2,48 7 2,459 Other Resources 474,383 452,699 Total Re1ourcea . Dtc. ..." .. 20, •19 $67,843 37,S60 105,403 728 106,131 108, 438 9,224 12,14 3 21,416 1,106 153,027 73,975 1,361 334,494 19, •19 s21s,211 Dre, Dtt. F. R. Otes F. R. &nlr. et otes Net, Due Treasury U. S. , Due Membera Net . Collection Items, etc., Gro11 Depoei11, 20,6H 21, •10 Ore. 20. •19 $216,914 S161,3S9 5,075 21,300 N... 20 ,162 10,511 2,H2 111,030 114,878 98,361 68, 220 199,412 73,2S8 198,647 S6,984 157,487 Capital 7,104 7,103 Surplus S,206 S,206 6,688 7S All other Liabilities, 3,806 3,S29 3,810 Total LiabilitiH, 474,383 <(52,699 334,494 OFFICERS FREDERIC H . CURTISS CHARLES A. MORSS Chairmat1 aad Ftdtral Rtst MH .411111 Go'1Jtrt1or CHARLES E. SPENCER, Ja. Dt/),ay GO'WrtrOr CHESTER C. BULLEN WILLIAM WILLETT DtpUIJ GO'Wrnor Ca1h11r CHARLES F. GETTEMY A11utat11 F1dtral lu11rut .41,at A11i1talfl Ca1hi1r1 L. WALLACE SWEETSER ERNEST M . LEAVI'Ii" FRANK W . C HASE HARRY A . SAUN DERS WILLIAM N. KENYON
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