BUSINESS IN U.S.A.

Auckland Star, Volume LXX, Issue 35, 11 February 1939, Page 4

BUSINESS IN U.S.A.

PROSPECTS FOR 1939. "MODERATELY GOOD." SEASONAL SLACKENING-OFF. Reviewing general business conditionsin the United States in their Januarv bulletin, the National City Bank of New \oi k states: — Ihe year 1938 has closed with some indications that the business upswing is levelling off, but with few signs that any considerable decline in activity is to be expected; and on the whole businessmen who venture opinions as to 1939 are looting for a moderately ' good year. The slackening in industrial operations toward the year-end has been mostly seasonal, with steel the only major industry in which the decline has been appreciably g: eater than usual. A number of cotton mills were closed during the holiday week, which is a frequent practice except in very good years. Otherwise the slowing up has been chiefly in outdoor work, or in lines that are between seasons. ' Business sentiment has been prepared for a flattening out of industrial activity around this time. Most analyses of the situation have emphasised that the ri«c has been uninterrupted for a period of .-ix months, and that it has proceeded more rapidly than any other forward movement on record, over a like time. This is sufficient reason for expecting it to glow down. When the upswing began production had run below consumption for some months, and inventories in manv placet had been drawn down as far as was practicable. The resulting need for goods gave the improvement a strong momentum at the beginning, which was accelerated by other factors once it was clear that a real turn had been made. Naturally, however, the momentur* originating from deferred needs slackens as production is expanded and the needs are satisfied: and the industries which have moved fastest have to mark time or slow down until the situation is ready tot another step forward.

On the other hand, it seems equally correct to say that, irrespective of temporary fluctuations, the upward movement has not gone far enough or lasted long enough to overload the markets seriously, raise costs unbearably, or set up other important maladjustments, such as might reverse the main trend. Few of the signs which ordinarily precede a major contraction of business activity are evident. The commodity markets have given no indications of over-speculation; on the contrary, the volume of trading haa been small and prices have had no great advance. Retailers and wholesalers' stocks range from normal to low, and merchandise buyers have been conservative in covering .early 1939 requirements. Bank borrowings have not increased. Security markets have been orderly. There has been no excess of debt-making to require liquidation. Moreover, business by any standard is still severely depressed, and of course it has a long way to go before running into the restrictive innuencea of bottlenecks in productive capacity, labour shortage, over-extension of credit, or the other factors upon which booms usually come to grief. Influence for Improvement. In addition to the foregoing, two positive influences which have given important support to business during the last half-year, will continue effective. Government expenditures have been running at the highest rate on record. In the first half of 1939 they will continue the record level, according to present indications, and the cash deficit will be very much larger than in the last half of 1938. -Although business sentiment everywhere takes account of the fact that Government debt is not a secure or lasting basis for recoverv. the Government cheques, to the extent that thpy are net offset by taxes and other receipts, represent added buying power in people's pockets. The disbursements will give support as long as they "last.