TRADE REVIEW.

Ashburton Guardian, Volume 56, Issue 71, 6 January 1936, Page 5

TRADE REVIEW.

BRITISH INDUSTRY IMPROVES.

SHARP ADVANCE IN BUTTER

United Press Association--Copyright) LONDON, January 4.

Markets entered the new year cheerfully fortified with the most pleasant recollections of 1935, in which industrial activity shook off all hesitancy and proceeded to surpass the 1929 high levels. A total of 340,000 more persons was employed. Building construction created new records in the steel industry, which was almost embarrassed by the new business toward the end of the

year. ■ > The volume of transactions on the Stock Exchange was about the same as in 1934. Government stocks were irregular and fell almost uninterruptedly—for the first nine months steeply, but only partially recovered thereafter. The movements do not offer conclusive evidence of future cheap money, as the recent firmness is largely due to technical considerations. The general opinion in the city of business men is that cheap money has reached its peak. The oil companies had the most profitable year since 1930. Non-ferrous metals were sounder all round. Rubber was disappointing. New capital issues were almost three quarters of those in 1929. Empire borrowing was disappointingly low, being only £15,000,000 sterling, compared with £29,000,000 last year and £63,000,000 in 1928.- Foreign lending shrank to vanishing point due to tho continuance of the Treasury embargo. The immediate outlook appears bright. The report of hank chairmen are"certain to be favourable. Further advances in industrial investments are probable within the next few weeks. Lon«r term prospects, however, are obscure. The European situation is causing the gravest anxiety, Italy cannot escape bankruptcy, whatever the Abyssinian issue may be. Germany s -condition is equally desperate. Ine increase in the number of unemployed, the breakdown of foreign trade, and the scant wages paid to those in employment suggest a serious .crisis in 1936. ~ , The "Economist" monthly trade survey states: While further recovery will depend on international events, the encouraging index of business activity remains unchanged at September's high level. All sections of engineering are making the greatest headway since 1929. The revival in the textile trades is marked, especially in wool, which is largely due to the rise in raw material. A feature of the last few weeks has been the scramble for coal as an insurance against a possible strike. . The commodity market, especially wheat, is more bullish. The attention of the wool trade is concentrated on Australian sales. Users are hoping that the probable increased demand will not send prices above a reasonable level. Contrary to expectations, butter has risen sharply. Considerable quantities of Australian have been withdrawn from sale. The demand is sufficient to take care of current arrivals and warrant higher prices, especially as it is anticipated that only 2000 tons of Australian butter will be shipped from next week. Baltic butters are also short. The delayed improvement in cheese has also materialised. While the trade does not expect the higher levels to continue indefinitely, it anticipates a fair average season, around 54s to 56s for New Zealand white and coloured. The Midland Bank "Review,." surveying the Dominion monetary policy, declares that deflation arising from the decline in sterling reserves in 1935, if permitted to continue, might have dire results, especially m respect of banks, which may be forced to soil securities. Fortunately, the 1935-36 trading season may prove more profitable. Australia is leading in the restoration of London funds, which are easing the internal monetary situation. Some deflation may possibly be necessary, but it might well have serious effects on trade and industry if continued. There is a strong case for monetary management, whereby the Government and the central bank, acting in concert, could mitigate deflationary consequences. The shrinkage of London funds, such as deflation required, should be achieved through the curtailment of advances to importers, not through the restriction of the supply of treasury bills by the banks. The facile notion that Australian, New Zealand, and South African pounds "normally" are on a parity with sterling is untenable. Each unit must be regarded as separate and subject to independent management without fixed relationship to sterling.