THE TREND OF BUSINESS.

Press, Volume LXVIII, Issue 20563, 3 June 1932, Page 3

THE TREND OF BUSINESS.

* CHAMBERS QUARTERLY REVIEW. HOPEFUL PROSPECT. TRADE AND BANKING RETURNS.

There is an encouraging- conclusion to the Chamber of Commerce's quarterly review of the trend of business in New Zealand which was issued at the monthly meeting last night. "It is possible," states the review, "that the efforts now being made by easing credit conditions to stimulate trade expansion and price expansion may bo effective. If so, they should provide a very welcome stimulus to recovery when next season's exports are ready i'or market." The full text is as follows: Returns of overseas trade for the latest quarter show a further slight decline in the value of exports, and indicate that the rapid contraction in imports over the last two years is being checked. For the year ended March 31st last, export values are £O.O millions less than for the calendar year, 1931, while for the same periods imports have declined by £1.5 millions. The following table compares total exports and imports, and gives the balance of overseas trade for the last five years ending on March 31st:--Millions.

The table shows that exports for 1931-32 are £22.0 millions, or 39-'< per cent, less than for 1928-29. Imports are £25.8 millions, or 53 per cent, less than for 1929-30. ' A table published in the British Board of Trade J'ournal compares the trade of all countries for which figures arc available for ]£>3l, and estimates tho decrease in 1931 compared with 1929. Over all these countries the total decrease in exports is 42.1 per cent. United States exports havo decreased 54 per cent., while the exports of the United Kingdom, Canada, Australia, British India, Malaya, and Japan lulve all declined by more than 40 per cent. The decrease in imports for all countries iB ftO.l per cent. Australia heads the list with a decrease of 70 per cent., while tho figures for Canada, United States, and Germany show declines exceeding 50 per cent., and those of India, Malaya, Italy, Japan, and Czechoslovakia show declines exceeding 40 per cent., These comparisons show that tho decline in New Zealand exports, is loss than the workl average, while the contraction in New Zealand imports is somewhat greater than the world average.

A more detailed review of the trend of trade can be obtained from a study of the quarterly figures. In the next table the general trend of tho movement is shown, but seasonal variations are avoided by giving figures for complete years ending in successive quarters. These figures are frcm the official returns, which make no allowance for changes in rates of exchange:— £ Millions.

Export Values Stable. The table shows that export values have remained fairly stable over the past three quarters, the slight decline in the' latest quarter being due to a substantial fall in export I 'values for tho month of March. The decline in imports is much less for tho latest quarter than for any quarter since June, 1930, and for the month of March is only £0.2 millions less than for March, 1931. The excess of export t; for the latest year is given as £11.3 millions, but imports are usually expressed in sterling values and exports in New Zealand currency. If exports are reduced to sterling values by allowing for ruling rates of exchange, the figure for, exports is reduced to £31.8 millions, and the excess of exports over imports is £8.6 millions, in sterling currency. When the exchange control scheme was established, it was estimated that approximately £l4 millions would be required in London this year to meet payments for interest, debt redemption, etc., over and above the. amount required to pay for imports. The Government has recently borrowed £5 millions in London, and this amount, added to the £8.6 millions sterling accruing from the favourable trade ' balance, gives a total which should approximately cover the commftments due abroad. Under these circumstances the conditions' which occasioned the control scheme have been removed. The Minister for Finance has announced that the scheme is to be abandoned in June, and it will be interesting to see what effect, if any, its abandonment has upon the balance of overseas payments, i The next table compares the quantity and value of the principal exports for years ending March, 1931 and 1932:

Tho table shows_ a substantial in-, crease in the quantity of wool exported and some increases in the quantity of butter, sheepskins, apples, and gold. Cheese, lamb, and mutton all show slight declines in quantity. Tho total values have fallen substantially for meatj dairy produce, and sheepskins; while for wool, apples, and gold they

have risen. Generally speaking, it appears that tlio values per unit over exports as a whole have been appreciably lower for .1931-32 than for 1930-31. Banking. Despite the severity of Ihe present depression, the published bankjng figures indicate a position Homewliat sounder than was tlie case in 1921. This may bo seen in the next table, which gives returns for Hie March ((uarter of the past six years: — ■! .C millions.

The table shown' that, for the March quarter of. 1927, advances exceeded deposits by £2.3 millions, while for the sainj quarter of 1931 the excess of deposits was £.0.2 millions, and for the March quarter of 1932 deposits exceeded advances by £3.1 mil.ions. Bank advalues are now about £4 millions greater than in 1928 and 1929, while bank deposits are £l million more than in 1928 and about £5 millions less than in 1929. The position of bank depositors is now nearly as strong as in 1930 and tuore than £3 millions better than iii March, 1931. In the next table a more detailed survey of the trend of bank figures is given. The returns are set out for each quarter of the last three years, but the published figures have been statistically adjusted for the normal seasonal variation. The figures given, therefore, do not conform with the published records, but they indicate closely the general trend of the bank returns:— • £ millions. (Corrected for seasonal variations.)

This table shows a substantial improvement over the position of a year ago, but a surprising fall in the excess of deposits since the Dei ember quarter of 1931. This fall may bo due partly to the transfer of sums overseas by people who feared a further rise in the exchange premium, and partly to the low level of rates for exports during the March quarter. Free and Fixed Deposits. These bank returns give little support to the widely held view that bank credit has been deliberately deflated. They show, on tho other hand, that bankers have advanced credit on a liberal scale during the past two years. The decline in advances during 1931 was probably an effect, rather than a cause, of depression. 'I ho next table shows clearly the nature of the deflation thai lias occurred in New Zealand:-

The figures in this tablo exclude Govern in cut deposits, which are included in previous tables. But they show a substantia] decline, which has been greatly accelerated Bince 1929, in the amount of free deposits, and a substantial and continuous rise through the whole period in the amount of fixed deposits. In the March quarter of 1929, free deposits were 148 per cent, of fixed deposits. In the same quarter of 1932, there were only 49 per cent, of fixed deposits. There has therefore been a very heavy contraction, in the amount of funds held by bank depositors in a form readily available for use, and a heavy expansion in the amount set aside in fixed deposits. It is generally agreed that the proportion of free to fixed deposits provides an excellent indication of the level of business confidence. Those figures ruggest a very lov, level of in the attractiveness of investment in business, and a decline in that confidence which, though accelerated over the past three years, goes back several years before 1929. 'lt may be expected that when business enterprise again promises secure and profitable investment, it will attract money from to deposits, and a change in the trend- of these figures Twill indicate that recovery is under •foray. . Total Bank Debits. , The total amounts debited weekly to all bank? in the Dominion now published in the Abstract of Statistics, provide a useful indication of the total volume of payments being made and therefore of changes in the volume of financial transactions. The average weekfy figures for the six months ending with March of the past four years are given in tho next table:— £ millions.

Those figures suggest that for the summer months of 1928-29 and 1929-30 the level of business activity was about the same. The summer of 1930-31 showed a fall of about 22 per cent., while for the summer of 1931-32 the fall has been about 31 per cent. This decline, however, covers the total of all financial transactions. The contraction has probably been greater in some parts of the field of buriness and less in other parts. Transactions in land, buildings, and shares have fallen heavily, and this may account for a considerable part of the total decline. In addition the heavy fall in export prices and the moderate fall in internal prices, together with the general reductions in wage and salary payments, would account for some reduction. Consequently it is improbable that the Volume of busines being transacted has fallen nearly as much as these figures might suggest. Other Indicators. Some detailed information on the extent of the decline in various parts of the business field is given in the next table, which seta out comparable

figures oi' various series for the March quarters of the last three years:— . (Figures in millions.)

These figures show a very heavy decline in mortgages registered and discharged, land transfers, and building permits. Totalisator investments for the past eight months are little more than half their total for the same period two years ago. Railway tonnage has fallen by about one-fourth, but a good deal of this may be due to the heavy decline in imports. Official estimates are now available for the estimated value of production at wholesale prices up to 1930-31. These figures show a decline from £125.3 milin 1928-29 to £9B millions in 1930-31, which represents a fall of 22 per cent. If a further fall of" 10 per cent, in the value of production has occurred in 1931-32, the present value is probably in the neighbourhood of £9O millions, or about 28 per cent, less than in 1925. The greater part of this decline, however, has occurred in pastoral products, where the fall in prices has been heaviest and where there is as yet no statistical evidence of a decline in the volume of production. In factory production the decline in tho value of the products between 1928-29 and 1930-31 was only 14 per cent. But here thq, decline in prices is much less than in tho case of pastoral products. Judging by the reduced number of workers engaged and the increased amount of shorttiine worked, it appears probable that the volumo of factory production has also declined a little. World Price Movements. In the past, movements towards prosperity or depression in New Zealand have been stimulated by changes in tho prices received abroad for our exports. Tho | resent depression is due very largely to the reduction of about 40 per cent, in the prices received for exports during tho past two seasons. This severe fall in the income - from exports has drastically reduced farmers' purchasing power and hence has reduced the sales, and therefore the purchasing power, of those selling goods and services in the home market. In this way depression, which hit the fanners first, has been passed on through the rest of the community. The process might be reversed and recovery ensured if export prices were to rise again to levels approximating those of 1928 and 1929. While New Zealand has suffered severely from the decline in prices, she has escaped tho full effects of the fall in gold prices. In the first place, the 'premium on sterling exchange has meant that New Zealand exporters have received a bonus of about per cent, on sterling prices. In the second place, since Britain's suspension of gold ! last September, British prices have been substantially above tho level of similar prices in gold-using countries. When Britain suspended the gold standard and sterling exchange became depreciated, it was anticipated that British prices of goods entering into international trade would rise roughly in proportion to the depreciation of sterling exchange. Actually, the rise between September and March last was, according to the "Economist" index number, about 0} per cent. A greater rise would have occurred had prices expressed in gold not fallen by about 13J per cent, during the same period. There is, therefore, a considerable gap between British prices' and gold prices consequent upon the exchange depreciation." But since gold prices have fallen, .British prices have risen less than was anticipated. At the present time, it is widely considered that tho world is unlikoly to recover -prosperity unless a substantial improvement in prices can be stimulated. In almost' all countries, the abnormally tow level- of prices has been accompanied by serious Budget deficits, heavy unemployment, reduced production, the freezing of bank assetß, and by trade and exchange restrictions, all of which tend to maintain the existing stagnation in commerce and finance. Prospect Hopeful.

In consequence of tho realisation of this position, active efforts are now being made in some leading centres to stimulate business activity and to improve prices. In tho United States, a large financial corporation has been established to take over certain frozen assets, and Government securities are being used as cover for Federal Reserve notes. The object of both these changes is tp ease credit conditions. In Britain the fall in world confidence in sterling which precipitated the suspension of the " gold- standard has been reversed. Britain is now described as. probably the most prosperous of all countries, and the flow of funds to Britain has threatened to lessen tho exchange depreciation, and, therefore, to bring British prices down more nearly to gold prices. But the Government is raising an exchange stabilisation fund of £l5O millions, tho* object of which is to keep the exchange value of the S>l down, and so maintain the margin between British and gold prices. In addition, the bank rate, which was 6 per cent, lfcst February, has been reduced until it now stands at 2-J per cent. The market rate is about 2 per cent,, and Treasury bills have been floated 'at less than 1 per cent. These rates indicate abnormally easy money conditions. Easy money has been- accompanied by very active trading on the Stock Exchange, and by rising security prices. In the past, improved security prices have usually heralded business expansion and rising prices. It is possible that the efforts now being made by easing credit condi tions to stimulate trade expansion and price recovery may be effective. If so, they should provide a very welcome stimulus to recovery in New Zealand when next season's exports arc ready for market.

o ir. " 5 ■ s ° •? o z it -M St: - i. o =2 | O &4 X M O O zj Cs HH K M 1928 . . 55.0 44.-1 io.c; 1920 57.1 45.1 12.0 1930 .. 49.0 49.1 0.1 1931 .. 39.5 1.2 1932 . . 34.5 23.2 11.;!

"c £ .» Q ■ v -St o f-. tn f-< " g • 5 Cm fo % (V o cu X y, g >3 W WW Hh 1929— March . . 57.1 45.1 12.0 Juno .. 56.2 46.5 9.7 Sept. .. 56.2 48.2 8.0 Dec. .. 55.6 48.8 6.8 1930— March -. 49.0 49.1 U.l June • - . 47.6 48.8 1.2 Sept. .. 47.1 45.0 1.3 Dec. .. 44.9 43.0 1.9 1931— March .. 39.5 38.3 1.2 June .. 36.9 33.4 3.5 Sept. .. 35.1 28.8 0.3 Dec. .. 35.1 24.8 10.3 1932— March 34.5 23.2 11.3

PRINCIPAL EXPORTS: YEAR ENDED MARCH 31st. Quantity V aluo (millions) (£ millions) 10-i 0-31. 1931-32. 1830-31. 1931-32. Butter, cwt . 1.81 1.91 10.51 9.82 Cheeee, cwt . 1.87 1.50 o.9G 4.07 Lamb, cwt 2.29 '2.24 • 7.05 5.75 Mutton, cwt 1.23 1.10 2.08 1.41 Wool, bales . .54 .71 5.46 G.55 SliPepskins (number) 11.38 12.78 1.29 .82 Apples, lb . 50.36 56.18 .63 -.69 Gold, oz. . .11 .15 .55 .61

1 "3 o o -% c 1 1. g % 5; K o fcf H3 j S O* i£ 1927 . . 4 S. 5 50.8 2.3 1028 • « rJ 4(5.1 0.2 1921) .. ns.2 40.3 J 1.9 1930 . . 57.5 53.7 3.8 i i9a i. . . 54.1 54.3 0.2 1932 53.3 50.'-! 3.1

Fer 6 1 a g-si O t/j 3T? o o S O O o S 2 o x -5 & ~ Kfi 192!*, M arch 57.4 40.7 10.7 .Tunc . 57.1 48.0 9.1 Sept.. Doc. . 57.7 . 58.0 50.4 51.8 7.3 0.2 1!>30. March 56.7 54.1 2.0 Juno . 56.2 54.7 1.5 Sept. . 56.5 53.5 3.U Dee. . 50.2 54.3 i .y J 031. 1.3 Ma rcli 53.4 54.7 Juno . 52.5 54.0 1.5 Sept. . 53.0 51.8 l.,s Dec. 54.0 49.2 5.7 1932. March . 52.0 50.0 2.0

Free as , Percentage MM rub Kl'ciFixed of Qr. £ ni. £m. Fixed. loin. . . 29.8 20.1 148 1920 .. 20.9 20.-1 1.31 1927 . . 24.4 2 1.0 no 1928 .. 24.5 25.5 90 1021) 25.7 29.0 s7 1030 .. 23.9 'iO.l 7 n 1931. .. .18.3 32.it 50 3932 .. 17.0 31.5 4<J

Weekly av 'age 1928-29 1929-30 1930-31 1931-32 Oct. .. 19.25 19.61 17.93 14.23 Nov. .. ] 8.85 21.17 17.70 13.79 Doe. .. 22.89 23.35 18.60 16.58 Jan. .. 21.65 19.56 13.86 13.10 Feb. .. 25.82 24.53 17.38 ' J7.32 Mar. .. 27.79 28.04 20.62 18.3S Av'age 22.71 22.71 17.6S 15.58 1.028-2!) eq. 100 100 100 77.8 68.6

193,0. 1931. 1932. Mareli Quarter. £ £ Mortgages registered 7.03 3.03 2.40 Mortgages discharged 5.20 2.60 1.71 Land transfers .. 6.11 2.91 2.34 Building permits Totalisator invest2.04 0.70 0.44 ments (8 in tli s,) 5.49 3.91 2.92 Exports 17.57 12.10 11.50 Imports 12.22 7.50 5.85 Railway freights (tons) 333 days 7.03 0.30 5.22