Regional President Speech

7 ¥ 0 < p. Gentlemen: \ 0 I have hot lately bean making addreeses, but when your Chairman, Mr, Uosessohn, Invited me to address your Association, I found it quite Im­ possible to decline, principally because during the war I asked him to do a job for us in our Tar Loan Organization, which he promptly and loyally agreed to do* What he did was very much better done and was of more ser­ vice to his country than anything that I am able to do for your organisation by making this brief address. In a word, he took hold of an important section of the War Loan Organisation as its chairman, and sold four times the quota of bonds allotted to that trade. The industry which you represent is, I believe, a section of the largest industry in New Toxic City. Your Chairman has asked me to tell you something of prevailing business conditions and what you may reasonably expect. It would indeed be a serious responsibility for one to undertake to propheey as to the future to such a body of man as you, who are very mudi better acquainted with the details of the buslnees which they are con­ ducting than I can possibly be* And it is, in faet, quite contrary to our policy to attempt any such thingX'J) But I am very glad to give you wna* we consider to be the actual facts both as regards industry In goneral, and the impression we get of your own Industry from the reports that are now given to us regularly by a number of your leading firms. In doing this I am going to take advantage of the opportunity to tell your Association of the system of business reporting which has bem de­ veloped by the different Federal reserve'banka, and especially our own. Perhaps it may lead to even a larger degree of cooperation from your Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 2 Association than we nov enjoy. Ae to the general industrial situation, you are fairly familiar with the faet that there has been, within the last ten months, a steady and a very marieed improvement in most of the industries; and I think that there is good evidence that for the most part this improvement is solid and is a real one. Of course I cannot say how this would apply to each of the in­ dustries. Some of them, I have been led to believe, have been in danger of going a little too fast; they may have given a little too large a meas­ ure of hopefulness to their orders* So that there have been some set­ backs here and there in the last year. But, speaking of the majority, there is no sort of question that conditions now are very different from what they were, let us say, no more than a year ago. Probably our old friend, pig iron, is still one of the best themometers, even if it is not a very good barometer of business; and there we find a very rapid recovery from the extreme depression of last year, so that in the iron and steel industry as a whole, production is now about double What it was a year ago, and some of the mills for special products are row almost at the peak of production. The textile trades, of course, have been disturbed by strikes and latterly by the great rise in the cost of raw materials, but taken as a whole their production has been well up towards noraal, and I think the same is true of a number of other industries. We, of course, have had a real build­ ing boom in the last year, and are still in the midst of it; and the same is true of the automobile industry, where production in May broke all reoords. And we have evidence, moreover, that both wholesale and retail trade in most lines is in healthy condition. About this 1 can speak quite definitely. You know before we undertook the task of collecting business Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 3 statistics reports of trade were confined largely to the use of adjectives. Business wae said to be good or poor, improving or depressed, adjectives which mean little when the economist attenpte to analyse conditions in an industry. The optimist usually said business was fine; the peeeimist said business was bad. I believe that Ur. Uoseesohn, in his letter to me, said that the garments trades were depressed at the present time. A study of our reports has convinced me that Ur* Mosessohn may have selected the wrong adjective. I do not know just what adjective to use. Therefore, I am going to avoid describing conditions, as we find them, in these abstract phrases. About twenty of the largest clothing manufacturers in Mew York City, as well as in Rochester, the other great clothing center in our dis­ trict, submit each month in confidence to our Statietics Department reports of their Bales or shipments. These reports show the dollar value of their shipments, but regretably do not show the nunber of garmente shipped. We have divided these firms into two groups, manufacturers of men's clothing and manufacturers of women's clothing. I believe that you are primarily interested in the women's clothing industry, which I understand is entirely distinct from the men's clothing trade. Our roports show that the dollar value of May shipments by fourteen manufacturers of women's clothing who report to ue each month was 10 per cent, greater than the dollar value of the shipments by the same firms in May, 1921. In April shipments showsd a decline of about 12 per cent., as compared with a year ago. The combined value of shipments during April and Kay, however, was about the same as during the corresponding period last year. There ie no doubt that your prices are somewhat lower this year than last, and pos- Ably your profite less; but if-we make allowances for these changee in priees we find that more shirt-waists, dressee and euite have been shipped out of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 4 New York this spring than were shipped last spring. That is the reason why £dUtA. I qprgr that your Chairman, Ur* Moseesohn, may have selected the wrong adjec­ tive when he described conditions in the garment trades as "depressed." Turning for a moment to the men's clothing industry we find that the shipments in Aoril by the seven firms that report to us were 65 per cent, greater than shipments in April last year. This comparison is not strictly fair because, you will recall, the men's clothing Industry in this city was in the midst of a labor controversy at this time last year. In May of this year shipments of men's clothing were 16 per cent, greater than the shipments made in May, 1921. These reports convince me that business is now better than it was one year ago and that the tendency is toward further improvement. It is true that if we go back to the year 1920 we find that there has been a decline of about 25 per cent, in the value of clothing shipments. This, to my mind, has been due to lower prices vhich now prevail, and indi­ cates a return to sounder and more etable business. I think we will all admit that conditions in the spring of 1920 were abnormal and, in comparing business today with that of two years ago, due allowances must be made for the decline in prices, declines in wages and declines in the ability of the public to spend with the same lavishness that characterized buying in the spring of 1920. I have much confidence in the accuracy of the figures nhidi the clothing firms subnit to us each month, as we have other means of checking these up* In addition to the reports we receive from the wholesale trades we also get confidential reports from the retail department stores. These reports show the dollar value of sales. I believe that we now have 64 of the largest department stores in the Second Federal Reserve District co­ operating with us in the oollection of this business information. In the Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 5 year 1921 the total volume of sales by these stores was in the neighborhood of |350,000,000, sufficient to make our figures representative. Sales by these stores in April were about 2 per cent, greater than were the sales in April, 1921. Some of the merchants told us that this in­ crease in business was caused by the late Easter. This, no doubt, exerted some influence but I do not believe it was an important factor, because we find that in May the stores again reported an increase of 4 per cent, in sales. Bear in mind that these figures show the dollar sales. Again, when we make allowance for the lower prices which now exist, there is no question that the store3 are actually selling a great deal more merchandise this year than they sold last year and this explains what is becoming of the clothing that you manufacturers are constantly shipping to the stores. Sales in May were the largest of any May on record with the exception of Way, 1920, when a New York merchant led others in reducing prices by announcing his famous 20 Der cant, reduction sale. •In addition to our reports of sales by both wholesale and retail firms, W9 have at our disposal other data to enable us to check up business conditions in the clothing industry. The Bureau of Labor issues reports which show the consumption of wool and cotton. These figures show that the New Hhgland woolen mills are now running at about a normal rate and we are told that many of then are sold up for their entire output for the fall season. Prices are becoming firmer, indicating a growing manufacturer's de­ mand. Raw cotton is selling at about double what it sold for last year. Raw wool haB risen 3till more. The mills are, I believe, turning out goods with a greater confidence than for some time that a market for their output at a fair and just Drice is reasonably assured. The wheels of industry are turning, and gradually approaching a nearly normal rate. Reports show that Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 6 employment is increasing rapidly and the officials in Yi'ashington have re­ cently informed the President that the unemployment crisis had passed. High­ e r orices for farm products have greatly helped the rural population, again rnaloijig it possible for the farmer to buy the clothing that you manufacture. Now as to the larger outlook. At hardly any period in the history of ouiA country has the banking situation been on a sounder basis. We now have amJjQle facilities to supply all legitimate demands for credit and those facilities\are better organized than in the past* Interest rates are at the lowest point tiv^gv have reached since 1918* Prices of securities have risen sharply during the paslfc year and all of our Liberty bonds are now selling in the open market at a smal\l premiisn. Business failures are on the decline. I do not tp JSae^ve the impression that in all business every- ) thing i3 all that can be desired, ^ >^here are still spots on the industrial horizon which must be cleared up. In mdWt of those industries which have recovered from the extreme depression of the peevat year or more, the recover- ies have been built upon solid foundations and I va^ew the future with reason­ able optimism. ,» x /jvno I should like to add one word about our system of business report- A v ^ ing. Some members of your organization probably report your sales tV -us. Others do not. I want to take this opportunity to thank you for what you are already doing and to ask you to continue to help us in collecting this valuable information. If vou are willing to help—and I believe that you will yourselves profit most from this information—I wish that you would write me a letter Baying that you will work with us* We shall send you a blank to fill in each month. You may rest assured that the individual re­ ports will be held in confidence. The aggregate figure is published in our Llonthlv Review of Credit and Business Conditions. If any of you wish to talk over these reports I shall be glad to ask one of the men who has charge Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 7 of collecting this information to call upon you personally end explain our system in more detail. This new svstec I believe has immense possibilities for the future security of trade, and I am sure no organization could find a more vital in­ terest in cooperating with us than yours. By this means, and I think in this alone, will it be possible for you to obtain,both in your own and allied in­ dustries, a clear and reliable picture of actual conditions and tendencies. All else is as it has been in the past, mere guess work and crude estimate. 71/hen we have this new system fully developed, it will be possible to organize industry tp a very high degree, and in a fashion never before possible; to i j u i £ P U L * > fCuusn. p r ntiffetAA competition and over-production; and by this means,I believe, A A largely to do away with strikes and widespread unemployment. Probably we shall never quite overcome the tendency to over-enthusiasm which is the root of all waves of expansion, and subsequent depression; but we can go a long way, and here I believe is the way. I thank you for the privilege of addressing your Association; I wish you a reasonably restrained prosperity, knowing that you and your workers will Day very dearly if you have too much of it, and overdo it. And I be­ speak vour cordial support of the new methods whose aim is to make business and industry more of a science, and less of a hazard and a gamble, as it has been so strikinglv in the last three years. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Benjamin Strong (1922, June 4). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19220605_benjamin_strong

@misc{wtfs_regional_speeche_19220605_benjamin_strong,
  author = {Benjamin Strong},
  title = {Regional President Speech},
  year = {1922},
  month = {Jun},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19220605_benjamin_strong},
  note = {Retrieved via When the Fed Speaks corpus}
}