FEDERAL RESERVE BULLETIN JUNE 1938 United States Foreign Trade and Business Conditions Abroad Member Bank Earnings and Expenses Number of Banks and Branches in [/. S. Annual Reports—Bank for International Settlements and Bank of Canada ******** BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM CONSTITUTION AVENUE AT 20TH STREET WASHINGTON Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis TABLE OF CONTENTS Page Review of the month—United States foreign trade and business conditions abroad 425-433 Revocation of measures affecting silver 433-434 National summary of business conditions 435-436 Summary of financial and business statistics 438 Law Department: Amendment to the law relating to loans to executive officers 439 Rulings of the Board: .* Directors' review of actions of trust department committees of national bank; nature of trust in- vestment committee minutes 439 Approval of acceptance of trusts by national bank 440 Renewal or extension of loans made to an executive officer of a member bank 440 Earnings and expenses of member banks, 1936 and 1937 441-447 Number of banks and branches, 1933-1938; analysis of changes in number of banks and branches, January 1- March31, 1938 448 Number of banks operating branches and number of branch offices, by States, December 31, 1936 and 1937 449 Group banking, December 31, 1937—number, branches, loans and investments, and deposits, by States 450 French financial measures 451-452 Annual Report of the Bank for International Settlements 453-495 Annual Report of the Bank of Canada 496-499 Financial, industrial, and commercial statistics, United States: Member bank reserves, Reserve bank credit, and related items 502 Federal Reserve bank statistics 503-507 Reserve position of member banks; deposits in larger and smaller centers 508 Currency in circulation 509 Gold stock and gold movements; bank suspensions; bank debits 510 All banks in the United States 511 All member banks 512-513 Reporting member banks in leading cities 514-517 Acceptances, commercial paper, and brokers' balances 518 Federal Reserve bank discount rates 519 Money rates and bond yields 520 Security markets 521 Treasury finance 522-523 Governmental corporations and credit agencies; Postal Savings System 524-525 Production, employment, and trade 526-534 Wholesale prices 535 International financial statistics: Gold reserves of central banks and governments 538 Gold production, monthly figures, 1929-1937 539-540 Gold movements 541-542 Central banks 543-546 Bank for International Settlements 547 Commercial banks 547-548 Discount rates of central banks 549 Money rates 549 Foreign exchange rates 550 Price movements: Wholesale prices 551 Retail food prices and cost of living 552 Security prices 552 Federal Reserve directory: Board of Governors and staff; Open Market Committee and staff; Federal Advisory Council 554 Senior officers of Federal Reserve banks; managing directors of branches • 555 II Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis FEDERAL RESERVE BULLETIN VOL. 24 JUNE, 1938 No. 6 REVIEW OF THE MONTH the following paragraphs there is presented a more detailed discussion of the overturn The withdrawal of foreign funds from the in our balance of trade and of economic con- United States, which has been in progress ditions in several countries with which the with few interruptions United States has a large volume of mer- International since last September, was capital movements chandise transactions. intensified early in May by French developments. The sharp reduction in FOREIGN TRADE OF THE UNITED STATES the exchange rate of the franc to 179 francs to MILLIONS OF DOLLARS MILLIONS OF DOLLARS the pound sterling, and the official announce- 400 400 ment that this was the bottom and that a rise in the franc was possible, started a return flow of funds to France on a large scale. While 300 300 to a considerable extent the flow of funds ap- pears to have represented a shifting of specu- lative positions, other measures in the gov- 200 200 ernment's program designed to strengthen the French economic position assisted the movement. These measures, dealing with the 1OO budget, industrial production, and the inter- national business of the country, are sum- marized on pages 451-452. 1933 1934 1935 1936 1937 1938 Much of the flow of funds to France came The chart shows that a great shift in the from the London market, but other countries balance of trade of the United States has oc- were also affected. In Switzerland the pub- curred since the spring of lished gold and foreign exchange resources Analysis of the balance of trade 1937. Previously the tend- of the National Bank declined by about ency had been toward the $30,000,000 in May. In Belgium the pres- development of an import surplus. Industrial sure was more severe, published gold and recovery and the growth of national income foreign exchange resources of the National had led to greater purchases of raw materials Bank declining by $132,000,000 in the two and other commodities abroad. After 1934 weeks ending May 19. In the Netherlands the forces of recovery outweighed the direct the guilder fell somewhat on the exchanges. effects on the country's merchandise balance In the United States the movement of for- of the reduced gold content of the dollar. The eign money out of the country was intensi- tendency toward an import surplus was ac- fied, but little gold accompanied it, because centuated in the last half of 1936 and early it was offset by a continued surplus of mer- 1937. Disappointing harvests following the chandise exports. drought in 1936 forced the country to import This surplus of U. S. merchandise exports to supply deficiencies in grain crops of which has been running at the rate of about $100,- it normally produces an exportable surplus, 000,000 a month since last September. A and the rapidly broadening industrial move- year ago there was an import surplus. In ment was accompanied by rising prices and 425 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 426 FEDERAL RESERVE BULLETIN JUNE 1938 more active purchases of raw materials, FOREIGN TRADE OF THE UNITED STATES partly in anticipation of future business re- [In millions of dollars] quirements. In the second quarter of 1937, as com- :[mports Exports modity booms subsided, the tendency toward January- January- Economic class April April a growing import surplus was checked. To Change Change a considerable extent the decline in imports 1937 1938 1937 1938 that occurred in the spring was seasonal, but Crude materials .. 347 194 -154 218 208 - 10 it continued during the summer under the Crude foodstuffs-.. 165 90 - 75 15 97 + 82 Manufactured foodstuffs. 168 107 - 61 54 57 + 3 influence of good crops, to which were sub- Semi-manufactures- _ _ 211 123 - 88 182 178 - 3 sequently added the more far-reaching ef- Finished manufactures. _. 174 135 - 39 497 549 +151 fects of the decline in business activity. The Total_._. 1,065 648 -417 966 1,088 +123 course of industrial production in the United States is shown in the chart on page 430. During the period July 1937-April 1938 Meanwhile exports were well maintained at exports of manufactures were maintained the high levels reached in the winter. In the at the high levels reached in ten months from July 1937 through April Maintenance the preceding vigorous advance 1938 there developed an export surplus of of high level of exports and American wheat reentered $840,000,000 against an import surplus of world markets for the first $90,000,000 in the corresponding period of time in several years. While exports of the previous year. manufactures did not increase during the Purchases by the United States of Cana- period, substantial gains were made over the dian wheat, and of corn from Argentina and corresponding period of the previous year South Africa, began to decline in when such exports had not yet reached Decline in their peak. The active prosecution of re- imports the summer of 1937 and virtually ceased in the final quarter. De- armament programs in several foreign clining activity in the textile and leather countries taxed the capacity of European industries was reflected during the summer steel producers and led to extensive sales and particularly in the fall in smaller im- abroad of American iron and steel manufac- ports of wool, hides, skins, and furs, prod- tures (including scrap), which as a group ucts which are drawn mainly from British showed by far the greatest increase over the countries, Argentina, and China. Imports of previous year of any United States export. rubber from British Malaya and the Nether- The equipment of foreign industry also lands East Indies held up well until the end created a heavy demand for machinery in of the year, but fell off sharply in January. this country. Other exports to show large The situation has been similar with respect increases over the corresponding months of to tin, which also comes mainly from British the previous year were automobiles, petro- Malaya, and Canadian newsprint and wood leum and its products, and aircraft. pulp. Knowledge that an increase in the Among countries that are highly indus- price of newsprint was to go into effect on trialized the largest purchases of American January 1, 1938, was a factor tending to products and the greatest increase in such sustain imports of this commodity until the purchases over the corresponding period of end of 1937. The table shows the foreign the previous year, were made by the United trade of the United States by economic Kingdom and Japan. There were substantial classes in the first four months of 1938 and increases of American exports to all the prin- the change from the corresponding period of cipal European countries with the exception 1937.