BRITAIN’S STEADY RECOVERY

Timaru Herald, Volume CXLI, Issue 20308, 6 January 1936, Page 9

BRITAIN’S STEADY RECOVERY

IMPROVED TRADE AND COMMERCE

COMMENT ON OVERSEAS FINANCE United Press Assoclatlon—By Electric Telegraph—Copyright (Received January 5, 6.30 p.m.) LONDON, January 4. The markets entered the new year cheerfully fortified with the most plesant recollections of 1935, in which industrial activity shook off all hesitancy and proceeded to surpass the 1929 high level. A total of 340,000 more persons were employed. Building construction created new records in the steel industry, which was almost embarrassed by new business towards the end of the year. Stock Exchange Operations The volume of transactions on the Stock Exchange was about the same as in 1934. Government stocks were irregular, and fell almost uninterruptedly for the first nine months steeply, but only partially recovered thereafter. The movements do not offer conclusive evidence of the future of cheap money, as the recent firmness was largely due to technical considerations. The general opinion of City businessmen is that cheap money has reached the peak. The oil companies had the most profitable year since 1930. Non-ferrous metals are sounder all round. Rubber is disappointing. The new capital issues are almost three-quarters those in 1929, .but Empire borrowing was disappointingly low, being only £15,000,000 compared with £29,000,000 last year and £63,000,000 in 1928. Foreign lending shrunk to vanishing point, owing to the continuance of the Treasury embargo. The immediate outlook appears bright. Reports of the bank chairmen are certain to be favourable. Further advances in industrials are probable within the next few weeks. Long term prospects, however, are obscure. Plight of Europe The European situation is causing gravest anxiety. Italy cannot escape bankruptcy, whatever the Abyssinian issue. Germany’s condition is equally desperate. The Increase in the number of unemployed, the breakdown in foreign trade, and the scant wages paid to those in employment, suggest a serious crisis in 1936. Britain’s Outlook The monthly trade survey of “The Economist” points out that while further recovery will depend on international events, the encouraging index of business activity remains unchanged at September’s high level. All sections in engineering are making the greatest headway since 1929.- The revival in the textile trades is marked, especially wool, where it is largely due to the rise in raw material. A feature in the past few weeks has been a scramble for coal, as insurance against a possible strike.

Firmer Commodity Market

The commodity market, especially wheat, is more bullish and more sober. The attention of the wool trade is concentrated on the Australian sales, and users are hoping that the probable increase in demand will not send prices above a reasonable level. Contrary to expectations, butter has risen sharply. Considerable quantities of Australian butter have been withdrawn from sale. The demand, is sufficient to take care of the current arrivals to warrant higher prices, especially as it is anticipated that only 2000 tons of Australian butter will be shipped from next week. Baltic butters are also short. The delayed improvement in cheese has also materialised. While the trade does not expect the higher levels to continue indefinitely, it anticipates a fair average season around 54/- to 56/for New Zealand white and coloured cheese. Monetary Policy “The Midland Bank Review,” surveying the Dominion monetary policy, declares that deflation, arising from the decline in the sterling reserves in 1935, if permitted to continue might have had dire results, especially in respect to the banks, which were forced to sell their securities. Fortunately, the 1935-36 trading season may prove more profitable in Australia, leading to the restoration of London funds, easing the internal monetary situation. Some deflation will possibly be necessary, but it might well have serious effects on trade and industry, if continued. There is a strong case for monetary management, whereby the Government and the Central Bank, acting in concert, could mitigate the deflationary consequences of the shrinkage of London funds. Such deflation, if required, should be achieved through curtailment of advances to Importers, and not a restriction on the supply of Treasury bills by the banks. The facile notion that the Australian, New Zealand and South African pounds were “normally” on parity with sterling is untenable. Each unit must be regarded as separate and subject to independent management, without a fixed relationship to sterling.