INFLATION IN BRITAIN

Press, Volume XCI, Issue 27591, 23 February 1955, Page 15

INFLATION IN BRITAIN

“SOME MYSTERY ABOUT ORIGINS”

There is still something of a mystery about the origins of the inflationary forces threatening the British economy, which have figured increasingly in Government statements of late, says the “Financial Times.” All the available evidence suggests that the rise in industrial output up to - the end of last- year was more than sufficient to take care of the extra consumer demand at home and a sizeable increase in exports. There has been nothing to indicate since then that the rising trend of production has been interrupted. At the same time, people are saving more. If what is happening is to be correctly described as a buying spree, then it is somehow being thrift ed With a powerful outbreak of There is certainly nothing in these constituent bits and pieces to make up a picture of an ordinary inflationary situation. Indeed, the Chancellor himself insists on this point, even when delivering himself of his latest series of grave warnings about possible dangers ahead. "♦?? ♦® ny « vid ® nc e of present inflation that causes him concern, but the size .of future import bills. ?\ tent ! his is a matter of definition. If future import bills are found to <,? e Z? ceßSiveL “ that the rise in the cost of imports proves to be larger than the increase in our foreign exchange earmngs—then the domestic situation- givreSUlt wiU be dubbe<l is , not v ®F y helpful for purauaiysjs. Ibe more practical question is surely; what kind of inflation is threatening the British economy? The f?E per , lence . 1951 shows how, in a situation in which the terms of trade were moving against Britain, a spectacular rtee 1 country’s import bill could occur addition to demand being made by the ordinary conhnViT; In fac l’ consuihptlon in that year hardly rose at all, in spite of thfe sharp increase in the volume of Imports and. n 01 th « trouble was ket stocfc-building on a rising marLittle Rise in Stocks Is there any sign of the beginnings of a similar movement now? Up-to-date Infa r im a r^c n H? n / he state o* business stocks is impossibie to come by. This is one of the most serious deficiencies in the Government s equipment for the conduct of economic affairs. Such data as are available—for example, the Economist’s” figure of stocks held by a representative sample of companies—take the story no further than the late summer of 1954. Up to that time the value in Process had risen remarkably little, considering the increased volume of goods coming off the production lines. By the end of the year, however, there was clear evidence of a widespread movement in the metal-using industries to increase stocks of steel, which had been run down in the first half of 1954. At the same time, stocks of non-ferrous metals, for which figures are available up to the end of 1954, were increased to a somewhat higher level than at the same time a year before. But neither in this case nor in any other of the commodities for which data is published is there any sign of a major restocking movement up to November or December of last year. If the source of the threat to the balance of payments lies here, it has emerged only in the last two or three months. That is, of course, precisely the period in which the stimulus of rising prices for materials has made itself seriously felt.