Federal Reserve Bank of Boston. "January 1, 1924, Vol. VI, No. 1," New England Economic Review (January 1, 1924). https://fraser.stlouisfed.org/title/7195/item/668557, accessed on January 21, 2025.

Title: January 1, 1924, Vol. VI, No. 1

Date: January 1, 1924
Page 1
image-container-0 MONTHLY REVIEW Of Industrial and Financial Conditions m the New England District By Frederic H. Curtiss, Chairman =and Federal Reserve Agent FEDERAL RESERVE BANK OF BOSTON VOL. VI BOSTON, MASS., JANUARY I, 1924 THE SITUATION The usual autumn peak' of manufacturing activity has been passed, so that some of the reports of curtailed production which were re- ceived during December were not unexpected. In certain industries, such as cotton manufactur- ing, the reported curtailment was even more than seasonal. Taking manufacturing establishments in New England as a whole, however, the rate of production is apparently not far from what might be termed "normal"-that is, average, or part way between the peak reached in times of pros- perity and the bottom reached during a depres- sion. There is little unemployment, and wages are high. The purchasing power of the people is good in relation to commodity prices, although the "standard of living" seems nowadays to re- quire so many extra things formerly classed as luxuries that trade in some "necessities" has suffered. While the seasonal peak of production is past, December is usually the month of the largest volume of sales of the year in retail stores. De- partment store sales in this district were larger this autumn than a year ago, and in so far as this is typical of retail trade as a whole, the results are encouraging. The increase compared with last year is not as large as most merchants ex- pected, nor, perhaps, as large as they were en- titled to make, in view of the slightly higher prices this year than last and the normal growth of the stores. December sales of the Boston de- partment stores, prior to Christmas, showed an increase of approximately four per cent over the corresponding period in 1922. This may not be very encouraging to the merchant, but, NO. I nevertheless, indicates a volume of trade that is really large as compared with manufacturing output. Price changes in the various commodities have nearly counterbalanced one another during the past few weeks, so that the general average has been more or less static, with a tendency toward a slightly lower rather: than a higher level. In fact, the business situation as a whole is in a somewhat similar condition. At such times it is quite difficult to forecast the direction of the next general major trend, because it is hard to foretell which of the factors already at work will become so important that they in time will provide the impetus needed to turn conflicting tendencies into a broad general movement of the business trend. The present situation is, therefore, one of a relatively large volume of distribution of goods to the ultimate consumer, a negligible amount of unemployment, and production reduced to nearly or even below the requirements of shipments. Then, too, credit is relatively cheap, and much more readily obtainable than is usually the case during a period when production has been de- clining for several months. There is a large volume of new construction under way, and the recent tendency has been toward an increase rather than a curtailment. Renewed building activity was one of the foundations upon which the business recovery of 1922 was based. The present irregularity in the general situa- tion is apt to continue, however, until some of the factors-whether those working for good or for bad cannot now be foretold-operate more forcefully than they do at present.
image-container-1 2 110XTHLY REVIEW OF THE FEDERAL RESERVE BANK OF BOSTO~ January 1, 11ONEY AND BA KING Money rates were somewhat lower in Decem- ber than in the previous month, continuing the tendency which first became noticeable in Oc- tober. Commercial paper in New York was quoted on a 5 ¾-5 ¼ per cent basis during Sep- tember and the early part of October, but had dropped to a range of 4¾ -5 per cent by the first of December. The yield on Certificates of In- debtedness of four to six months' maturity de- clined nearly half a point during that same period. The yield on Certificates is supposed to be a good index of rates prevailing on high- grade short-term investments, and is quite sen i- tive to seasonal changes in the money market as well as the more pronounced cyclical movements. Money rates have not declined quite as rap- idly in New England as in the ew York market, although by mid-December there was a moderate amount of commercial paper selling on a 4¾ per cent basis in Boston. The recent decline in rates was probably more than a normal seasonal movement, inasmuch as it was contrary to the average experience at this time of the year, either before or since the es- tablishment of the Federal Reserve System. Of course, there is far less seasonal variation in rates NEW ENGL A ND BANK now than before the Reserve system began to op- erate. This is easily realized from a study of the chart at the bottom of the next page, showing the long-time trend of commercial paper interest rates. The curve shows almost no distinct! y seasonal movements since 1914, whereas in the earlier years these movements stand out promi- nently, as may be noted from the curve during 1900 and 1901, when rates increased nearly one per cent between midsummer and the end of the year. For about 20 years before the war, the loner- time trend of commercial paper rates was slightly upward, and averaged just under five per cent. lf this pre-war trend is projected forward to the present time, the "normal" rate would be about five per cent, which was the actual level of the average rate prevailing in ovember. While most of the changes which took place in the banking situation of New England during September were largely seasonal in character, there was a noteworthy increase in the volume of loans and discounts of the member banks during the third week of the month. Although loans based on commercial paper and those secured by collateral expanded, particularly the collateral CREDIT CONDITIONS 19 2 1 1 9 2 2 1 9 2 3 10::;oJonFeb.Mor.A r.Mo JuneJul A u SetOd. NovDe c. Jan. Fe~. MarA r. Ma JuneJul Au .Set.OctNov. Oe c. Jon . FebMor.A r Mo JuneJul Au Set.Oct.Nov. Dec. ' 0 850 '? I::: 0 6 00 ·, ' ,oo ~ Member banks' loans to C1!Stomers increased_ sharply during the third week of December, due to a larger volume of loans based on collateral. Demand deposits decreased, as 1s usually the case just before Christmas. Member banks' borrowings from the Federal Reserve Bank of Boston were seasonally high in December, at nearly the peak for the year. Curves are based on reports from member banks in nine large cities.
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