F E D E R A L R E S E R V E B O A R D

STATEMENT FOR THE FBESS X-1737

For Release In Morning Papers , Monday, December I , 1919.

The fol lowing i s a review of general bus iness and. f i n a n c i a l condit ions throughout the seve ra l Federa l Reserve D i s t r i c t s during the month of November, as contained i n the forthcoming issue of the Federal Reserve B u l l e t i n :

Hie r e p o r t s on business and f i n a n c i a l condit ions f o r the severa l Federal Reserve d i s t r i c t s continue to emphasize the prevalence of an unabated business a c t i v i t y due to p e r s i s t e n t demand f o r goods a t a l l s tages of production- The eagerness and sustained buying capaci ty of the u l t i n a t e consumer appear to be the explanation of a continued Expansion of wholesale and r e t a i l t r ade , which i s to be found even in those d i s t r i c t s most immediately a f f e c t e d by the coal and the s t e e l s t r i k e s . Curtailment of i n d u s t r i a l operations because of the coa l shortage had been only sporadica l ly enforced up t o the middle of the month, but the imminency of d r a s t i c ac t ion looking toward the conservation cf vanishing coa l supplies was already apparent at that da te , the shortage being e s p e c i a l l y acute i n the Kansas City a id St . Louis d i s t r i c t s .

Notwithstanding the demoralizing e f f e c t s upon general business tha t might have been expected to accompany any widespread i n d u s t r i a l d is turbance in the bas i c i n d u s t r i e s of the country, there was* v i r t u a l l y unanimous testimony concern-ing the increase i n the volume of wholesale and r e t a i l t rade i n terms of p r i ce measurement. In severa l d i s t r i c t s emphasis i s placed upon the increase in physical volume of s a l e s , d i s t r i c t No. 1, f o r example, repor t ing tha t the general r e t a i l trade shows " inc reas ing bus iness over l a s t year , not only in amount as measured in terms of money r e c e i p t s , bu t in volume". In d i s t r i c t No. 2 , i n q u i r i e s cover-ing over 4q establ ishments engaged i n var ious brandies of r e t a i l trade indica ted percentage increases i n sa les values ranging from US per cent i n jewelry to 141

per cent in c lo th ing , while the percentage increases in number of u n i t s sold varied from per cent i n f u r n i t u r e to 4S per cent i n f u r s . D i s t r i c t No. 3 a l so t e s t i f i e s t h a t the volume of r e t a i l sa les f o r the f i r s t p a r t of November was q u a n t i t a t i v e l y grea te r than f o r the corresponding per iods l a s t year and l a s t month. In d i s t r i c t No. 8 alone the r e t a i l t rade in the r u r a l d i s t r i c t s had f e l t the e f f e c t of bad weather, which had a l so inf luenced unfavorably the sa les of wholesale dry goods i n c e r t a i n sec t ions . Orders placed with wholesale boot and

shoe concerns, however, were improving and even except ional ly heavy in some cases .

The r ap id turnover i n wholesale and r e t a i l trade i s ev iden t ly ou ts t r ipp ing increases in cu r ren t product ion, as evidenced by deple ted or exhausted dealers ' s tocks and by the o f t e n repeated complaints of manufacturers , who a l l ege sca rc i ty of labor and of raw m a t e r i a l s . Widespread d i s a f f e c t i o n on the p a r t of a l l c l asses of workers i s a s se r t ed to be a f u r t h e r cause of diminished ou tpu t . There i s , poss ib ly , a tendency to exaggerate the magnitude of buying opera t ions , by think-ing. of purchases and s a l e s i n terms of pre-war p r i c e s , ins tead of cons idermg them in r e l a t i o n to money incomes on the new p r i ce b a s i s . Never theless , i n view of the ephemeral cha rac te r of the i n d u s t r i a l s i t u a t i o n i n the presen t t r a n s i t i o n per iod , more conservat ive buying mi#i t have been expected. But there are not as ye t many i n d i c a t i o n s of a d e s i r e t o r e s o r t to the p r a c t i c e of t h a t econojcy which has been urged upon the country f o r so many months.

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P a r a l l e l i n g the t rade a c t i v i t i e s j u s t ou t l ined , a growing volume of specula-t ion has developed. In the review of business f i n a n c i a l condi t ions dur ing October i t was pointed out t ha t speculat ive a c t i v i t y throughout the country was reaching dangerous l e v e l s . This a c t i v i t y continued unabated u n t i l e a r l y in Nov-ember the Federa l Reserve Banks advanced discount r a t e s . The advance was s l i g h t but accompanied, as i t was, by an announced discount po l i cy , i t was e f f i c a c i o u s in causing a reduc t ion of loans ,

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Reports from the a g r i c u l t u r a l sec t ions of the country ind ica te a considerable amount of crop damage due to excessive r a in s and insec t p e s t s . D i s t r i c t No. 6 s t a t e s t h a t the cot ton crop i s the shor tes t on record in t h a t t e r r i t o r y as a r e s u l t of the a c t i v i t i e s of the b o l l weevil, while the Texas cot ton crop, although i t promises to be the l a rges t from the point of view of money value, i s 15 per cent below the 10 year average of condit ion because cf bad weather. The qua l i t y of Oklahoma cot ton has been damaged by r a ins which have a l so i n t e r f e r ed with co t ton picking i n d i s t r i c t No. 8 . For the same reason, the sowing of winter wheat was delayed i n d i s t r i c t s No. 8 and 11, the acreage being reduced i n consequence. A large area has been put in winter wheat i n d i s t r i c t No. 10 and a good stand i s repor ted- Sowing was in progress i n the Pac i f i c Northwest, the p r o b a b i l i t i e s being that the acreage would l a rge ly exceed that of 1918. The corn c rop , although raixwianiaged in c e r t a i n l o c a l i t i e s w i l l , i t i s est imated, prove to be la rger thafi tha t of 1918 except in d i s t r i c t s No. 5 and 6, Pennsylvania r epor t s the l a rges t corn crop in the h i s t o r y of the s t a t e .

D i s t r i c t No. 1 repor t s tha t the tobacco grown in the Connecticut va l l ey region w i l l exceed the output for 19I8. The Kentucky and Tennessee yield., as repor ted from d i s t r i c t No. 8, a lso shows an increase not only over the preceding year but in excess of the 10 year average. The crop grown in d i s t r i c t No. 4, however, i s est imated to be from one-quarter zc one-third s h o r t , and the y ie ld i n d i s t r i c t No. 5 w i l l probably be about 60$ of normal. Bright tobacco i s bringing 40 to 70# per pound and the export demand : s very i n s i s t e n t . The q u a l i t y of the crop i n Pennsylvania i s poor and production below the ten year average, as the r e s u l t of adverse weather conditions.. With the year ending October )1 , d i s t r i c t No. 12 r e p o r t s that Ca l i fo rn ia has rounded out "the l a rges t c i t r u s and deciduous f r u i t season" i n the h i s t o r y of the s t a t e . F lor ida c i t r u s f r u i t s are not maturing as wel l as they should and the market i s sa id to be poor,

The g ra in movement has been slow, the Minneapolis d i s t r i c t r epor t ing that the farmers are holding the i r gra in f o r higher p r i c e s , while d i s t r i c t No. 10 r epo r t s that corn and oats are being held back f o r s imilar reasons . Unt i l th® middle of the month, wheat p r i c e s i n Kansas City showed continued s t reng th ; oats remained p r a c t i c a l l y unchanged, and corn advanced a f t e r a p r i ce recess ion .

Receipts of wheat a t 16 i n t e r i o r markets during October were 50,774,164 bushels, as compared with 65,178,605 bushels during October 1918. Receipts of com and oats show a marked f a l l i n g off from the t o t a l s f o r the same month l a s t year , being 12,364,107 bushels and 24,041,974 bushe l s , r e s p e c t i v e l y , aga ins t 2),2$7,o50 bushels and 31,567,793 bushe l s . Wheat f l o u r production i n October amounted to 15,00$,000 b a r r e l s , as compared with 14,087>000 b a r r e l s in October-

Recei-pta of c a t t l e a t 15 primary markets during October were somewhat i n excef of thP t o t a l f o r the same month l a s t yea r , the respec t ive f i g u r e s being 2,317,4$?

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October, 1918, corresponding to an index number of 123* Receipts during September, 1919. amounted to 1,704,944, the indeat nuniber being 7? Receipts of c a t t l e a t the s ix p r i n c i p a l markets of the Kansas City d i s t r i c t vt sc 5 per cent larger during October than in the same month of the preceding yea r , but the t o t a l s f o r the 10 month per iod were 8,5 per cent below the f i g u r e s f o r the corresponding months of the preceding year . The decrease i s " a t t r i b u t e d in p a r t to the large t r ans f e r of c a t t l e from the dry regions of. the Northwest to the South, where a p l e n t i f u l supply of feed abounds,' The car shortage and a d i s p o s i t i o n to hold c a t t l e on f eed f o r higher p r i ce s are a l so considered as f a c t o r s i n the reduct ion

„ of supplies of c a t t l e on the markets." There was a shprp f a l l i n g off i n r e c e i p t s of hogs a t the markets of the /Kansas Ci ty d i s t r i c t , 31 per cent below the f igu res f o r October a year ago. I t i s said tha t while t h i s i s taken as a sign t h a t there are fewer hogs now in t h i s country than l a s t year , i t i s a l so contended tha t many hogs are being held back f o r f a t t e n i n g as there i s more corn i n the country than at t h i s time l a s t yea r . Sheep r e c e i p t s f a l l off in October 5-5 per cent from the monthly record of a year ago, while marketing of horses and mules was 17 per cent heav ie r . Receipts of c a t t l e during October in the p r i n c i p a l markets of the Chicago d i s t r i c t , a l so show a 6 per cent increase ; although f o r the f a l l t e n months the 1919 r e c e i p t s decreased 7 per cent as compared with the corresponding period of the preceding year .

Average p r i c e s of beef and mutton in the Chicago market f or October show a decl ine from the p r i ce s of October, 1918. Kansas City s t a t e s that c a t t l e p r i ces advanced s l i g h t l y i n October, "but that there was a sharp drop in the market f o r hogs.

Lumber stocks are except ional ly l i ght , being reported as 75 per cent of normal in d i s t r i c t s No. 6 and 11 and about 70 per cent of normal in d i s t r i c t No. 12, Production in d i s t r i c t No. 6 i s not over 60 per cent of normal f o r the season, the prime causes being labor s&ortage and bad weather, although there has a l so been a s l i g h t l e t - up in volume of orders received. On the other hand, d i s t r i c t No, 12, repor ts a. s teady increase in orders at a time when a normal seasonal dec l ine might have been expected.

In genera l , bu i ld ing a c t i v i t y has been unpreaedsntsd f o r t h i s time of. the year . Where a f a l l i n g off in cons t ruc t ion a c t i v i t i e s i s ind ica ted by a drop i n bui ld ing permi t s , the movement i s not as pronounced as u sua l a t th i s season and severa l d i s t r i c t s r epor t increases in .permi ts during October over the preceding month.

According to d i s t r i c t No. 6, "Flor ida repor t s ind ica te that the weather has x been favorable f o r nava l s to re s products , and r ece ip t s have been p ropor t iona te ly

larger than f o r previous months. Notwithstanding the heavier r e c e i p t s , the market has kept up wel l and p r i ce s continue e x c e l l e n t . Export demand i s increas ing and there i s a large domestic demand f o r both ro s in and turpentine*"

Production of bituminous coa l during October was 54,579>000 tons as compared with 47,403,000 tons during September, the respect ive index numbers being 147 and 128. The high record f o r production during the week ending October 11 was surpass A by the output f i g u r e s f o r the week ending October 25, which were 2,000,000 tons in excess of the e a r l i e r f i g u r e s , the speed up being due to p r e -para t ions f o r the impending coa l s t r i k e . Anthracite coa l shipments dur ing the month of September were 6,560,150 tons, corresponding to an index number of.117. as compared w i t h 5,687,401 tons during September, corresponding to an index number of 101.

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The output of beehive coke decreased f rom 1,790 ,466 tons dur ing September t o 1,551,980 tons i n October,

D i s t r i c t No. 3 r e p o r t s t h a t the Centra l Pennsylvania coa l f i e l d s are t i e d up very complete ly . D i s t r i c t No. 4 says that the Conne l l sv i l l e r eg ion has no t been a f f e c t e d by the coa l s t r i k e . "Last year t h i s reg ion produced fo r i t s record weekly output a id f o r i t s own coking operat ions 500,000 tons , bes ides shipping seve ra l hundred thousand tons . Recently the reg ion produced 300,000 f o r i t s own coking bes ide a much l a rge r tonnage to outs ide consumption." D i s t r i c t No. 9 r epo r t s s u f f i c i e n t coa l suppl ies at the docks to care f o r the needs of the i n t e r i o r .

D i s t r i c t No. 12 r e p o r t s a decrease both in the d a i l y output and i n s to red s tocks of petroleum. D i s t r i c t N<), 10, on the other hand, announces a new high record f o r product ion from the wel ls of Kansas and Oklahoma i n the mid-continent f i e l d . Wyoming has surpassed Pennsylvania as an o i l producing s t a t e and now ranks seventh.

Labor condi t ions i n the zinc and lead, mining d i s t r i c t s are repor ted to be improving, al though ce s sa t i on of operat ions was threa tened by the coa l s t r i k e . Transpor ta t ion d i f f i c u l t i e s have betn severe , shippers u t i l i z i n g broken c a r s a f t e r making loca l r e p a i r s , while empty coa l c a r s , t r u c k s , and teams have been used f o r hau l ing lead i n order to r e l ea se ca r s f o r z inc t r a n s p o r t . There have been only s l i g h t advances in the p r i ce of z inc ores . No surp lus s tocks have been moved. Lead p r i c e s hare cdvvnced, however, and surplus s tocks have been, used up.

Copper i s s e l l i n g at a p r i c e not much above the average cos t of product ion, while s i l v e r has touched new record high p r i c e s , the quo ta t ion being $1,363 per ounce on November 24,

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Except in cases of enforced, id leness due to i n d u s t r i a l d is turbances , the chief l i n e s of manufacture continue to e x h i b i t the marked a c t i v i t y cha rac t e r -i s t i c of the preceding months, r i s i n g p r i ce s of raw m a t e r i a l s not operat ing to r e l i e v e the pressure of buying orders , al though here and there counseling caut ion in the accumulation of producers ' s tocks. D i s t r i c t No# 1 r epo r t s the market f o r raw wool more ac t ive than a month ago, f i n e r grades being in e spec ia l ly g rea t demand with p r i c e s f u l l y 5 per cent h igher , while medium grades a re lower and coarse wools near ly 50 per cent below the maximum p r i ce s obta ining during the war. Corroborative testimony comes from D i s t r i c t No. 4 to the e f f e c t that the f i n e r grades of wool are held f o r exceedingly high pr ices , while medium low grades are f a i r l y p l e n t i f u l . There appears to be uncer ta in ty regarding the p robab i l i t y of a s h i f t of demand from the higher to the medium grades. The percentage of woolen machinery i n operation in the New England mi l l s has never been greater a t t h i s time of the year .

As fo r the New England cotton mi l l s , those manufacturing gray goods are reported to have, had a phenomenal business which has r e su l t ed in many con t rac t -ing f o r t h e i r e n t i r e output f o r several addi t ional months- The scarc i ty and abnormally high p r i ces of the f i n e r q u a l i t i e s of cotton have led to the buying of more Egyptian and Peruvian cotton by the oTine goods m i l l s . Present indica-t ions are for higher p r i ce s of•fcha f in i shed product s ix months hence. I t i s s i g n i f i c a n t t ha t D i s t r i c t No. •) mentions increasing sa les of machinery to co t ton m i l l s , la rge p r o f i t s having induced expansion.

The most recent avai lable news concerning cot ton yarns i s to the e f f e c t tha t t r ad ing has become slack, the p r inc ipa l demand now coming from k n i t t e r s . Pr ices remain s t a t ionary a t achieved hi^x l eve l s .

Summarizing the prevalent conditiona in the hide and l ea ther using i n d u s t r i e s , i t appears tha t stocks of fchu coarser grL.deG of hides are accumulating somewhat. The demand f o r calf skins and f i n e r grades of l ea the r i s unappeasable, however. In the boot arid shoe industry, heavy orders indicate sustained demand a t present or even higher p r i ces

Up to the middle of the month the coal s t r i k e was not yet proving a f a c t o r to be reckoned with in the production of i ron and s t e e l , e i t he r in the Phi ladelphia or the Cleveland D i s t r i c t s , while the Birmingham region repor ted business to be very ac t i ve . This does not mean tha t the m i l l s in (District No. 3 and D i s t r i c t No. 4, were, as a whole, operat.'.ing any where near capaci ty, the Cleveland repor t s t a t i n g that the production of s t e e l during October averaged about 60 per cent of the r a t e immediately before the s t ee l s t r i k e , while a t the time of wr i t ing i t had r i s e n to 70 per cent of tha t amount* The s t e e l m i l l s in the Chicago D i s t r i c t were gradually increas ing the scale of t h e i r operat ions , but excessively short coal supplies were causing apprehension.

The leading i n t e r e s t s are inc l ined to r e s i s t the pressure to increase .the schedule of p r i ce s f o r s t e e l products, but mater ia l f o r quick shipment i s com-manding even higher premiums. • Crude and semi-f in ished m a t e r i a l s show a pro-nounced p r i ce r i s e , while i t i s repor ted from Cleveland tha t the p r i c e s of semi-f inished s t e e l , p ig i ron , and scrap are a l l several d o l l a r s higher than a month ago*

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Pig i ron product ion, as was t o be expected, declined, sharply in October, from an output of 2,487,§65 tons f o r September to 1,863,555 f o r October, the index number dropping from 107 to 80. U n f i l l e d orders of the United S t a t e s Steel Corporation increased from 6,2sUe638 tons a t the end of September to 6,472,66s tons a t the end of October, the respec t ive index numbers being 119 and 123.

Wherever condi t ions of employment are r e f e r r e d to , evidence i s adduced to show shortage of supply. A temporary surplus in D i s t r i c t No. 12 due to the

• r e lease of l a rge numbers of workers i n the shipyards was being r a p i d l y absorbed. The Boston employment o f f i c e r epor t s employers' demands to be 18 per cent heavier than a t the same time l a s t year . Numbers employed in New York Sta te during October according to the I n d u s t r i a l Commission f e l l about 2 per cent , as a r e s u l t of s t r i k e s , although numbers of employees in s t r i k e f r e e l o c a l i t i e s showed a s l i g h t increase . D i s t r i c t No. 3 i s s u f f e r i n g from a scanty supply 0'£ both Sk i l l ed and u n s k i l l e d labor ; there i s a shortage of farm labor in D i s t r i c t No. 6, and D i s t r i c t No. 8 mentions e spec ia l ly the lade of s k i l l e d l abor .

In view of the disturbance:; to production occasioned by s t r i k e s , with no counterbalancing diminution of buying pressure , i t i s not su rp r i s ing to note a s l i gh t increase in p r i ce s f o r October. The index number of wholesale p r i c e s of the Bureau of Labor S t a t i s t i c s increased from 221 i n September to 223 in October. A new high, l eve l f o r raw mate r i a l s was reached, the index number r i s i n g from 216 in September to 220. Among the subgroups included in the group of raw mate r i a l s f o r e s t products achieved a record f i g u r e of 234,. . surpassing the previous September record of 227. The index f o r farm products r e g i s t e r e d 253 aga ins t 240 f o r September. The animal products group alone declined s l i g h t l y from 215 to 212. Consumers goods rose from 226 to 228 aad producers ' goods decreased from 212 to 211.

The sudden drop in the p r i ces of cotucrodi ta.es and s e c u r i t i e s t h a t had been the focus of a susta ined speculat ive i n t e r e s t followed the advance i n d i s -count r a t e s announced on November 3 by the Federal Beserve Back of New York# Call loan r a t e s rose rap id ly to. a spectacular climax on November 12 when a quotat ion of 30 per cent was reached — a f igure not a t t a i n e d since the panic of 1907. Heavy l i qu ida t ion of stock shares with sa les exceeding mi l l ion shares on the same day caused a v i o l e n t drop in the i n f l a t e d p r i c e s

. of many s e c u r i t i e s t raded in . The New York cot ton market a l so f e l t the e f f e c " of the monetary str ingency and p r i c e s receded h a s t i l y .

The de te r r en t e f f e c t upon speculation of high c a l l loan r a t e s has been somewhat o f f s e t by the ac t ion of outside banks in increas ing t h e i r loans on c a l l i n the New York market, thereby to a c e r t a i n extent counterbalancing the r e s u l t s obtained by loca l cont rac t ion . D i s t r i c t No. 4, fo r example, repor ted tha t despi te abnormally heavy demands both from the country d i s t r i c t s and from i n d u s t r i a l cen te r s fol lowing the e f f e c t s of the s t e e l s t r i k e , the loca l s t r ingency had been increased by d i spos i t i on to lend funds on c a l l . At a time when high c a l l loan r a t e s i n the money cen te r s coincide with the existence of surplus funds in sec t ions where crops have been harvested-and l oca l demands a re smaller the t r a n s f e r of funds to money cen te r s may not

s. only be a se r ious hindrance to the e f f e c t i v e curbing of specula t ion, but may go forward a t a time when other d i s t r i c t s are in need of funds f o r a g r i c u l t u r a l or commercial purposes .

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The New York market f o r conmer6ial paper i s repor ted to be du l l , with r a t e s l a t t e r l y on a 5S per cent to §4 per cent basis* d e a l e r s f i n d i n g t h a i r bes t market among the i n t e r i o r banks* Bank c l ea r i ngs everywhere have been except ional ly heavy* The Board1s f i g u r e s of volume of check t ransac t ions continue to show expansion.

The issue of new s e c u r i t i e s by uomestic corporat ions during October i s reported by D i s t r i c t No* 2 to amount to about*$390,000,000, being in excess of the September f igures* A very large number of p re fe r r ed shares were put out* I t i s not surpr i s ing , in view of p reva i l ing high i n t e r e s t r a t e s and the uncer t a in ty as to the length of time tha t may elapse before the investment r a t e f a l l s , , to f i n d p re fe r r ed shares to a c e r t a i n extent taking the place of long time bond i s sues .

During the month s t e r l i n g exchange, f r a n c s , marks,and l i r e f e l l to new low l eve l s , marks s e l l i n g a t 2.05 cents on November 18; s t e r l i n g a t 3 .991 and f r a n c s a t 9-&0 on November 20+ Lire were quoted a t 12+60 on November 12* Since then there have been s l i gh t recover ies , but no improvement in the fore ign c r e d i t s i t u a t i o n to warrant any subs tan t ia l or permanent r i s e in quotations#

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