BUSINESS TREND.

Press, Volume LXVI, Issue 20103, 5 December 1930, Page 23

BUSINESS TREND.

<#C SD production COSTS. _ ()F COMMERCE c^bulletin. fading, "The Trend of t' 3 " i New Zealand," the CanterU* „f Commerce discusses in rfc aDd °f P °' t banking deposits, and ad- ■ . and other factors m the Nation, to show the need for costs in the Do-

the full text of the bul " f „ teen prepared by the Economics at Canterbury If; of overseas trade published .„mher last show an apprein the trade bal- ? thfl year ended June last S «e d a exports by £1.2 mil--80145 Vnr the year ended September imports by £1.3 milapprovement is thus £2.5 ■P- hroueht about by a contraemillions in the value of imwhich is Partly ofEset by a de- ** 500,000 in the value of ex(bmpwed with tho correspondf- -Trf 1928-29, exports for the *SS September, 1930, show a fall fjjj millions, while imports have Lreduced by £2.4 millions. The imports has, however, been mainly to the last quarter, rtpwh-were £3 millions lower ffferthe corresponding quarter a L This reduction is probably ?totie recent increase in Customs to higher exchange rates, and Sfoa importations following upon a tewl of confidence in business lit*. Exports for the September "rfw were £500,000 less than for fme quarter last year, the reducduo partly to an exceptional of specie in September, 1929. Kmssible that these official figures IVmewtat more favourable than is Luted by the actual trade balance, Ljmorteis' declared values, from AlUe official returns are compiled, M eeaed the amounts realised in fee! whea prices aro declining.

. Overseas Trade. taut changes in total exports and tartj and ia the balance of overseas 5 are set out in the following JjU which gives totals for complete hits' ending in successive quarters.

(fimillions.)

lltboagt export priees during 1930 Nw the levels yst owing to considerfcareaseaja production, total exJMWJ are BOW higher than they raifte 1926-27 season. But total Wanes, despite increases in proabout; £9 millions h'ttTii *928-29. The table shows, hjJrVt . ei P«ts have declined jJjktte viable trade balance has tatST" 8 a much smaller ex- ■" ■twr a mneh shorter time than 1926-27. This result is nhw rff although export bbm3M *n and tho balance of favourable in 1928 no ' ex pand as *ftr? 6een expected, tvhile since Bwrhil ton^ rac '' on export values, hS.t* , rcdnce d more rapid-7-taa-Baai & snch case3 _

v. tjand of Banking. ° £ relationship befctanimJ Z® as tr ade balance and w e ® n bank de P<>sits and } Zealand is now wide»4*n# n comparison of the ; taefrfoHows with the figures for ft A. «T Sl J OWS a close relationWmd w is generallv kte-L""l? mal variations > th e s "e tea ji, n „ e een removed, and the K& D „ ot th 1 actual bank «- fc» »ft»» ne tr end of those rek removal of seasonal varia-

w t „ u „ s fcL* in JSP?" 8 trado balance > &®SS.Seitr^'l' greatly Uey J?' Ed again till in June, level a pp r «- S^ T «iap^ ed «v IT** 1 in 1927 > »rf seasonal rariai£V° W at about the !fe***Zi?7*T%'r 1928 ' but I«arter 1 milhon s higher. and i 3/ r ßll^ 1 in " l mnv v. decllne ln addue to th e fact S due for rexnis«W ntS . overseas > are Jiiav 1,0 pe that ex " <ti °&hl»L? Mpme mor Q favourin view 1&. imprnro ln export %re? rnn ! n , both trade - must be regarded

Ban * Debits. 'eflttf tho^" 168 S iven above . t moUQts of f unda i^ cate th « «- eiT»ni° i.- ' nor Tho y g^e ,-_j e - raeas business ation of the the Domin-

ion. Perhaps the best available indicator of internal business activity is the volume of bank'debits to all accounts, which must follow closely the total value of all business done. * In the next table the average weekly debits are given for the six months, April to September, of the last three rears. Debits to Government accounts aro excluded.

51 roe and Fixed Deposits. These figures show that average weekly bank debits for the past six months have been 2 per cent, higher than for the same period in 1928, and 7 per cent, lower than for the corresponding months of 1929. These percentages should indicate approximately the variations in business activity during the periods compared. A greater change, and clearly a significant one, i 3 seen in the relation of fixed and current deposits. It has been pointed out in previous Bulletins that a decline in tho proportion of free to fixed deposits is usually accepted as indicating a decline in. the confidence of those who use money for business purposes. An increased proportion of free deposits indicates that holders of money want it free for active use, while a decreased proportion means that they are putting funds into fixed deposits where they will be safe. For some years this proportion of free deposits has been declining and the percentage of free to fixed deposits has now reached a level unapproached at any time during the last thirty years. Free and fixed deposits in September quarters of recent years, and the percentage of free to fixed deposits, are as follows:

£ millions.

PercentSeptember age free quarter. Free. Fixed, to fixed. 3 925 .. 26.8 20.9 128 1926 .. 24.9 21.1 118 1927 .. 21. S 23.4 93 1928 23.3 29.2 80 1929 . . 24.0 30.6 78 1930 .. 20.8 31.7 65*

Fixed deposits are now at the highest level they have ever attained, but free deposits have reached their lowest level since 1918. It appears that holders of funds have been increasingly intent in recent years upon finding safe investment for their funds, and increasingly unwilling to use them directly for ordinary business purposes. The figures above certainly appear to indicate an abnormally low level of confidence in business prospects.

Prices and Other Factors. The decline in imports is itself an indication that the demand for imports is lower and it is probable that this lower demand extends to goods produced and consumed within New Zealand. Other indicators, too, point to the conclusion that business activity has decreased. The number of unplaced applicants at employment bureaux for mid-October was 6028 in 1930, compared with 6264 in 1929, but the number employed on public works in September was 12,592 in 1930, against 10,083 in 1929, while the trade union unemployment percentage was 13.5 for August last, compared with 9.4 a year earlier. Post Office Savings Bank withdrawals exceeded• deposits for the six months ended September, 1930, by over £2,000,000, compared with £400,000 for that period of 1929. Comparing the same six monthly periods town land transfers declined from £8.3 millions in 1929 to £6.0 millions in 1930, country land transfers from £8.7 millions to £7.6 millions, and all land transfers from £17.0 millions to £13.6 millions, while building permits fell from £4.8 millions to £3.0 millions. For the two months August and September, totalisator investments in New Zealand were 22 per cent, lower in 1930 than in 1929, while for the Christchurch race meetings in November the decline was 24 per cent. Value of Exported Products. But the most significant factor in the trend of business conditions is undoubtedly the present low level of prices received for' exports. According to the official indexes published for September last, wool was then 15 per cent, below pre-war level, hides, skins, and tallow 4 per cent, below, dairy produce 10 per cent, above, meat 26 per cent, above, and all export prices 6 per cent, above that level. The following table, computed by the "Mercantile Gazette" from official returns, gives some indication of the effects of price changes on sheep and cattle products exported during the last five seasons:— £ millions.

These figures give no hint of the increases that have taken place in production of botli sheep and cattle products. Despite such increases-—and they have been considerable, sheep products for 1929-30 fetched £7i millions less, and cattle products S, \ million less than for the preceding year. So far it appiears that the effects of lower prices have been concentrated mainly upon sheepfarmers. But present indications are that lower prices will be received by other exporters during the coming season, and the contraction of income resulting from reduced export prices must result in a considerable contraction of exporters' purchasing power, and hence must reduce the demand for the goods and services produced by industries selling in the local market.

Internal Prices High. It might reasouably be expected that, if internal prices were also to decline, the volume of sales of goods and services in the local market might be higher, and that the contraction of production and employment might be less. But while prices all over the world have been falling heavily, internal prices in New Zealand have proved particularly insensitive and have remained at high levels. While export prices average only 6 per cent, above the 1914 level, retail prices (all groups) are 07 per cent., average wages 66 per cent., and the average of three sheltered groups of wholesale prices 79 per cent, above that level. Prices of exports, particularly wool and dairy produce, have declined further since September, and present prospects suggest that the priees received for exports in the 193031 season will be definitely lower than in 1929-30. Such' price disparities have been referred to repeatedly in these Bulletins. They have been closely associated with most of the Dominion's troubles since 1925, and they have become increasingly significant as export prices have declined. Since export priees cannot" be controlled, and since there is apparently no prospect of export prices rising within any reasonable period to the level of internal prices, the only way to remove these disparities, and so to remove the troubles dependent upon them, is to reduce the internal prices which constitute the costs of production for all our industry.

£ i2 m ■? tn -2 o © © o o y. 1 8 X *. c H SH R>2 iardi 48.7 53.0 4.3 to. .. 46.3 52.1 5.8 Stptembet 48.4 51.6 3.2 Desembcr . 45.3 49.9 4.G Pitarei. ■ . 45.7 48.2 2.5 June 46.4 47.4 1.0 September , 45.8 46.2 0.4 Detember . 48.5 44.8 o. 7 IS3Jtareh „ 54.9 44.4 10.-5 fae 55.6 43.5 12.1 September . . 56.2 44.1 12.1 December . . 56.2 44.9 11.3 1529— , Maxell ' . « 57.1 45.1 12.0 . Jttae .. 56.2 46.5 9.7 September .. 562 48.2 S.O December .. 55.6 48.8 6.S 1930— March .. 49.0 4Shl 0.1 June. .. 47.6 48.8 1.2 8 eptemtier .. 47.1 ASS 1.3

(£millions.) £ =3 o •' p< 1 a> fcrtli Jin SatS Jbk jjjf'eabei J** •ttaa j*&siber V : »»w 'fStk Se f<mber *. , x •a < 50.7 .. 50.2 .. 50.3 .. 49.2 • • 48.0 47.5 -• 47.5 - 50.0 • • 51.5 • • 52.8 '•• 54.5 56.6 •• 57.4= , -• 57.1 •• 57.7 - 58.0 •• 56.7 >• 56.2 —■ 56.5 5 s § •S .2 48.6 49.3 49.1 49.5 51.2 51.3 49;cf 48.0 4C.4 45.6 45.9 45.1 46.6 48.0 50.4 51.8 54.1 54.7 53.5 m 6i T* « O O S ? 5! o S5 HQS< 2.1 0.9 1.2 0.3 3.8 2.1 2.0 5.1 7.2 8.6 11.5 10.8 9.1 7.3 6.2 2.6 1.5 3.0

£ millions. April , w „ 1928. 1029. 1930. 15.38 18.05 15.49 Mav 15.49 16.95 16.74 June 15.00 15.80 14.75 July 14.78 15.80 14.37 August 13.84 14.43 13.43 September 13.22 15.40 15.01 Average 14.62 16.07 14.96 Per cent, of 1928 100 110 102

Sheep. Cattle 1925-26 ' .. 21.24: 18.52 1926-27 .. 22.06 16.69 1927-28 .. 27.25 20.76 1928-29 .. 26.51 21.95 1929-30 .. 18.97 21.46