IS IT PERMANENT?

New Zealand Times, Volume L, Issue 11522, 18 May 1923, Page 4

IS IT PERMANENT?

AMERICA’S PROSPERITY REMARKABLE CHANGE IN SHORT PERIOD. AN INTERESTING REVIEW. The prosperity of America is invariably reflected in the prosperity of New Zealand, owing to the increased purchasing ' power of raw etc. —from this' 'country'. Thus a summary of conditions in America last month, as compiled by the firm of John Dunn, Son and Co., of New York, is of more than passing interest to local business men. The summary states that a well maintained rate of industrial , production not far from normal capacity,-.-together with increasing freight traffic, full enjoyment, and a large volume of retail and wholesale trade, fully justifies the assertion that the country, as. a whole is enjoying a good measure, of prosperity. The remarkable change.in conditions that has ■taken -place in- so short a time suggests that the present state of activity may not be enduring. For this reason, and because of the disastrous experiences of 1920, the situation is being analysed with unusual thoroughness by bankers and economists. All seem to feel that if reasonable caution prevails no uneasiness need be felt as to the current year. r A WARNING. After that much will depend on the size and value of the 1923 crops. To the minds of some the present revival in this country is but the forerunner of a world-wide resumption of trade based on the immense amount of replacement work to be done in order to replenish stocks and bring equipment and plants and dwelling space up to a normal basis. To others it appears that conditions are artificially supported by the vast amount of building now being done, and these latter are of the opinion that when this is a general falling off in business activity may be expected. All concede that a real danger exists in the possibility of undue speculative activity that may carry prices and production to levels out of all Teason, and in this way bring about a sudden collapse that will be disastrous to even conservative business interests. At the present time, according to competent observers, nothing of this sort is taking place, there being in evidence no more than the usual proportion of speculative manipulation. BANKING CREDIT SATISFACTORY As to banking credit, the position appears to be satisfactory. The increase in industrial and commercial activity at present high prices has, of course, created a large demand for funds, and outstanding Credit has expanded until it is now equal to that of the so-called period of inflation in the last half of 1920. Up to this time this lias brought about only a reasonable advance in interest rates, and the banks have experienced no difficulty in meeting all requirements without unusual recourse to the Federal Reserve Banks. These latter, it may he well to explain, are a separate system of Government supervised hanks whose chief purpose is to afford a means of furnishing'the regular National and other banks, in times of money stringency, with a re-discount market for commercial paper. This enormous source of credit, backed by some three billion dollars of gold, has not, as yet. felt the slightest strain. This is conclusively shown by the fact that on November 12th, 1920, the ratio of gold reserves to liabilities of the combined Federal Reserve Banks stood at 44 per cent., while at the present, time, due to the great influx of gold during the past two years, it stands at 72.6 per cent., and has varied little from this high level for some time. In other words, the lending power of these hanks, which in 1920 was stretched to the limit j. is to-day . well prepared for any calls, upon it ..that may develop and that may be considered as proper by the Governors. LABOUR COSTS ADVANCE. That the labour unions should be alert to take advantage of present conditions is but natural, and the outlook is for a further advance in the item of labour costs. . The American Woollen Company has voluntarily advanced wages 121 per cent., while the employees of the New England cotton industry have demanded an increase of 15 per cent., and have threatened to strike. A postponement of the strike order has been granted until April 15th at the request of the operators, and it seems probable that the demands of the men will be met, as already some of th© largest mills have conceded advaifw of T2j. pei cent. There is also much talk of an increase being given to all unskilled labour in the steel industry, and the leading copper mines and brass mills have raised the pay of this class of their employees. In the building indfiStry' agss ate paid, wbidh, when overtime is Included, are almost unbelievable ; masons, plasterers, and 1 carpenters often earning 20 dollars to 25 dollars per./day,, or as much per day as was earned in a week not many years ago. FOREIGN TRADE STATISTICS The foreign trade statistics published by the Government for the month of February and previous periods for comparison are-as follow (the figures are given in millions of dollars): — Feb. ’23 Jan. ’23 Feb. '22 Exports 310 339 251

The value of imports for December (the latest published') was 297,000,000

dollars, and is the largest for any month during the junst year excepting September, at Which time’umisual efforts wore being made to enter goods before the new tariff became operative. Viewing the figures for the year 1922 in although very much lens than the cnortho conclusion that the ‘foreign trade of the country is now on a basis both as to exports and imports that may be considered equal to pre-war levels. Comparison of t.l'.e figures above must not be made .without a full allowance for the higher prices now prevailing These would probably average about 40 per cent. Adding to the 1913 values about 40 per cent, to equalise this difference we have a result- which chows that the volume of business transacted with the outside world during 1922 compares well with pre-war standards nlthugh very much leas than the enormous totals of 1920. The- inflow; of gold in February was the smallest- for any month during the last three years, being only 8,532,000 dollars, while exports were less than 1,400,000 dollars. The net imports during; January were 32,820,000 dollars, and those of February last, year 26,968,000 dollars. THE STERLING EXCHANGE. A quiet market lias prevailed of late for sterling exchanges. The range, of quotations for the past month lias been a very narrow one, from 4.67) to 4.71. As time goes on, however, increasing confidence is felt in the future of the pound sterling, and it is not considered nt all probable that any important decline need be anticipated. French francs have, on the contrary, enjoyed an active and rising market. This has naturally given rise to rumours of an impending settlement of the German reparations controversy, but so far no definite progress seems to have been made in that important matter. It is felt though that present conditions cannot last long, and that tile situation, is Bo bad that a change for the better must oome before very long. Exchange on Canada, which for a short period ruled at par or better ha® declined, and Canadian funds are again at a discount of about 2 per cent, in this market. It is generally believed that the German Government is endeavouring to stabilise the value of the mark at present levels, and while it- is true that fluctuations for gome time have not been important, it does not seem probable that this can bo accomplished under present conditions. Our usual table follows, allowing quotations for the principal currencies during March : Sterling Drafts on Australia.. —Opening, 7.70; high, 4.71; low, 4.674; closing, 4.67-J; parity, 4.86|. Sterling Demand Drafts on London. ■ —-Opening, 4.70; high, 4.71; low, 4.67 J; closing. 4.671; parity, 4.86|. French Francs, Demand Drafts. — Opening, .0610; high, .0694; low - , .0601; closing, .0665; parity, .193. Italian Lire, Demand Drafts.—Opening. .0480; high, .0507; low, .0473; closing, .0503; parity, .193. German Marks, Demand Draft© (per 100) .—Opening, .0044; high, .0052 ; low, .0041; closing, .0047; parity, 23.80.

Year Year Year Year 1922 1921 1920 1913 Exports .... .... 3832 4485 8228 2484 Imports .... Export balance . 2509 5278 1792 .... 716 1976 2950 692