BUSINESS IN U.S.A.

Auckland Star, Volume LXVII, Issue 230, 28 September 1936, Page 4

BUSINESS IN U.S.A.

! A BUSY SUMMER. i PEOPLE SPENDING FREELY. 1 BEST FOR SIX YEARS. The summer trade season ill U.S.A. has just come to a close with satisfactoryresults to the business community. In its monthly review for September, the National City Bank of New York reports as follows: — With the industries operating at the highest level in six years, farm prices advancing and the bonus payments and other Government disbursements adding temporarily to purchasing power, the volume of goods moved has equalled the most hopeful expectations. Industrial and trade gains over last year, for the three months, have been in the range of 15 per cent to 20 per cent. General business indexes, reflecting the fact that the seasonal decline was less than usual, rose in July to a new high point for the recovery, and although, slackening automobile operations may pull the August figures down, the drop will not be material. More money lias~been spent on travel and vacations than in a good many years, and July railway earnings more than doubled a year ago. Thus far, at least, the crop losses due to the drought have had little apparent effect upon the business turnover. The areas involved reported a slowing down of buying during tile extreme hot weather, but on the whole have shown surprisingly little loss of trade. Rural retail sales in July were 18 per cent better than last year, according to a Department of Commerce compilation, and by all accounts they made a satisfactory gain in August also. Department stores in Western cities, as well as Eastern, have shown good increases in the past month, though the gains were somewhat smaller than in July. Effects of the Drought. In considering the effect of the drought on fall business, the most practical opinion naturally comes from merchants in the territories affected, who study conditions in their trade areas and plan their purchases accordingly. Reports from the wholesale markets show that the farm States generally are going ahead with preparations for a busy autumn. In Chicago, Minneapolis, Kansas City, St. Louis, Dallas, Denver and other Western cities attendance at fall openings during August has been the heaviest since the beginning of the depression, and the volume of business in proportion. This is in line with results reported earlier from Eastern wholesale markets. The Department of Agriculture estimates that although farmers' cash income will increase less than seasonally this fall, the total will be greater than last year, due to increased sales of live stock and higher prices for crops, which offset the smaller yields. The loss of buying power in the Northern Plains States will be made up by gains elsewhere. Government relief and soil conservation payments will likewise add to farm purchasing power. Thus for the remainder of the year at least farm buying is expected to be fully maintained. -i The Economic Aspect. Of course these indications as to trade do not justify representations_ that the drought is anything but a calamity. Those who believe in restriction of production may point to the increase in total farm income as representing a gain in purchasing power, but the point overlooked is that the higher prices which produce the iiigher income must be paid by consumers, and after paying more for food they will have less with which to buy other things. Also consumers will have to pay in due course, through taxes or otherwise, for the relief extended by the Government, and for resettlement, reforestation and_au the other projects set in motion by the drought. These will be a charge on future purchasing power. Farmers themselves are both consumers and taxpayers. Thus the higher prices will be absorbed by higher costs for both producer and consumer, and the rise, of costs is unfavourable. That the fall trade outlook may be interpreted as : favourable, despite the foregoing, is explained in several ways, rpr one thing, much of the expected rise in retail food prices probably will not come until 1937.- The consequences, of the crop failure will thus be deferred, and so spread out that they can be borne more easily. Meanwhile, factory workers are better able to face an advance in their In lflcosts than they were in the comparable situation two years ago, by reason of the increase of 26 per c«it in industrial payrolls, and of 17 per cent m real wages J in that time. " ' . ' The election in this country is doubtless holding some plans for busmess expansion in suspense, but the trade news shows again, as business historians lia\ e frequently demonstrated, that the belief that Presidential election years are always poor business years is incorrect. Iheto is a growing disposition to believe that major labour troubles, including the threat S the steel industry, will not develop in time to stop fall business improvement.