SIGNS OF RECOVERY.

Putaruru Press, Volume XI, Issue 268, 7 September 1933, Page 5

SIGNS OF RECOVERY.

THE RISE IN PRICES. American Influence Analysed. That business in on the qp grade in the United States and in other countries, is the opinion of the National City Bank of New York. The upward movement in business continued in the United States throughout June without interruption, although normally a summer recession would be well under way. As, within a few weeks from the end of that month, the crops would be moving, it was expected that the upward movement would be continued, or at least the gains which had been made would be maintained. The extent of the movement may be judged from the fact that from the middle of March to the - commencement of July the steel mill operations rose from 15 per cent, of capacity to 53 per cent., that the car loadings of merchandise rose from 450,000 a week to 588,000 by the middle of June, and that electric power ‘ production advanced from 1375 million kilowatt hours to 1598 million kilowatt hours by the third week in June. This is the most impressive recovery, writes the “ Review ” of the National City Bank Of New York, ever made in the United States.

More Employment,

These increases in production, the

“ Review ” informs us, are generating purchasing power at an encouraging rate. The industries are giving more employment, and, in many cases, better wages. From April to May there was an increase of 5 per cent, in factory employment, and of 11 per cent in payrolls, according to the United States Department of Labour, and these figures contrast with the usual seasonal movement, which is downward. During June, further increases have occurred, and, according to published estimates by the American Federation of Labour, more than 1,600,000 workers have been re-employed since the end of March.

The manner in which the changes have affected the various classes of the population have been, on the whole, in the direction of a better business equilibrium, due to the agricultural improvement. The farmer is gaining, not only because the prices of his product are better, but because they have advanced more than the prices of the things which he buys. According to the price index numbers of the United States Bureau of Labour Statistics, the farm products group was up 30 per cent, from the low point, and the foods group 14 per cent., while all other groups combined were only 3 per cent, higher.

The increase in price and the better business here noted occurred before the institution of codes and Government control. Perhaps the movements were in anticipation of the results of the Government programme. Hence arose the question whether this improvement was due wholly by speculative buying. The National City Bank thinks there is no reason for alarm because prices have advanced rapidly. The recovery, it considers, was inevitable, and it is natural that it should be rapid in view of the abnormally depressed levels to which prices had fallen. From the autumn of 1931, the banking situation in the United States exerted a destructive pressure on prices, and when the banking crisis brought the climax of this deflation, and the pressure eased, the rebound was natural. All economists have been of opinion that prices would recover as business recovered, in view of the experience of past depressions, and the abundant credit resources to support a higher price level, and this is what occurred.

.The National City Bank accordingly considers the rise in prices which has occurred is a natural rise, which confirms the opinion that the cause of the fall was the disorder in production and exchange, the banking difficulties, and the loss of confidence, all interacting in a vicious circle; and that neither the money supply nor the monetary system was an important factor in it. No increase in the circulation was necessary to make the turn, for the supply at the end of June was no, larger than at the bottom of the depression a year ago. It was even diminishing.