The Wanganui chronicle. WEDNESDAY, SEPTEMBER 5, 1934. ARE CONDITIONS IMPROVING?

Wanganui Chronicle, Volume 77, Issue 210, 5 September 1934, Page 6

The Wanganui chronicle. WEDNESDAY, SEPTEMBER 5, 1934. ARE CONDITIONS IMPROVING?

q”HE whole of Mr. Coates’ Budget for the current financial year rests on the assumption that conditions generally will improve. It is, therefore, pertinent to enquire whether there is any justification for the policy which presumes a continuance in increasing tempo of the uplift in trade. In the first place, it must be remembered that at the beginning of the current calendar year there were two factors presenting themselves which tended to influence buying policy on the part of importers. Prices then were regarded as low and the general expectation was that the tendency would be for advances to take place. Prices have since moved as was anticipated. The other factor was the statement made by Mr. Forbes that the exchange would not be altered until the end of the export season. The inference drawn was that the exchange might then, and probably would, be reduced. The policy which a buyer naturally followed was to order early in the year, but to defer deliveries until after June 30. This led to an increased demand for goods by merchants and encouragement was given to the movement by the uptrend in the price of wool which overshot all expectations. A considerable increase in the imports into New Zealand at the present time is therefore to be expected. Another factor which has affected the position is the devaluation of the American dollar, which has eased the situation in so far as importations from the United States is concerned. The foregoing factors, operating on a market that was fairly bare, could not but bring about increased importations and higher customs revenue. The same conditions led to an increase in employment and a generally improved tone all round. But will ■this wave last? That is the vital question. The answer to the question as to the duration of the uptrend cannot be supplied direct. It can only bB answered by inference. The best way to seek the answer is to discover the trend of events in the major manufacturing countries of the world. Germany’s condition is unique and not satisfactory, but the declaration that Germany is unable to meet her foreign commitments requires more substantiation than the bapc assertion of Dr. Schacht. It would appear that a vigorous policy of public works undertaken for the purpose of relieving the unemployment situation has resulted in the coffers of the State being drained dry. France is also in an unsatisfactory situation, the details of which, are too complicated to set forth here now. Belgium, too, is in a depressed condition, and it may be taken for granted that the demand for wool by the continental countries will not be very strong. The general opinion is that the wool prices will improve over those which prevailed during the sales held at Brisbane, but it is not anticipated that they will reach the levels of last year. The more important country from the point of view of New Zealand is the United Kingdom, and in a secondary sense the United States of America. It may be taken as a rough and ready rule that an action or reaction which is registered in either the English or the American economies will appear in New Zealand’s economy some six months later. That is to say, if conditions generally take an upward turn they can be expected to follow suit in New Zealand half a year later. The condition of business in Great Britain was reviewed by the Midland Bank Monthly Review for June-July, when it was shown that a considerable improvement in the import and the export trades had occurred over the same period (first five months') of the previous year. The imports increased by £34,200,000, and the exports by £10,700,000. Commenting on these figures, the Monthly Review states: “The welcome recovery in British business, expressed nowhere more clearly than in the decline of unemployment over the past year and a-half, has been claimed as the fruit of many factors lying near the hearts of a wide variety of interpreters of it. All are agreed, however, that the recovery is confined to internal conditions; indeed, there is so far little sign of expansion in the world’s international trade.’’ For conditions in the United States of America, the Monthly Letter of the National City Bank of New York is relied on, the July issue of which opens as follows: “The reports of business during the past month have given evidence of the usual summer slackening, but the recession has been moderate. On the whole the showing has been as good as the optimists had any right to expect, and better than the pessimists were looking for. Production in most industries is being curtailed, and the general policy of both merchants and manufacturers is to reduce inventories that were built up during the spring rise. Trade reports are less favourable than earlier in the year. However, forward buying and stocking during the upward movement were more conservative than in the widespread speculation one year ago, and the reaction is more moderate accordingly.” Then later on comes the significant statement: “The capital goods industries show little or no improvement.” The two statements combined indicate that a short-run improvement is being experienced. From past experience this short-run improvement—which is not of a fundamental nature should find its registration in New Zealand for at least another six months, and it may go longer than that. It would appear then that Mr. Coates’ expectation in regard to his Budget revenue for the current year are likely to be realised, but it should be regarded as something which has to be underpinned by yet more solid achievement than has yet been accomplished if that same improvement is to remain permanent.