BUSINESS TREND.

Press, Volume LXVII, Issue 20179, 6 March 1931, Page 16

BUSINESS TREND.

NEED FOR ECONOMY EMPHASISED. CHAMBER OF COMMERCE bulletin. "It is because of the severe contraction in the national income that drastic economy is urgently needed both in public administration and in private enterprise. It will entail some hardship, but it can no longer be avoided or deferred. It should lead, however, to lower costs of production with consequently wider markets, higher 'production, and fuller employment. It may mean lower incomes, but it need mean no permanent lowering of standards of life. It Bhould indeed 'raise' those standards, for economy, reduced to its simplest terms, means the transfer of economic ' resources, whether human ,or material, from less essential to more essential purposes. In our present reduced circumstances wo can offord to devote our resources only to those purposes which are most essential." Such is the conclusion of the 74th Bulletin of the Canterbury Chamber of Commerce, entitled "The Trend of Business in New Zealand.' * The report, which is prepared by the Department of Economics of Canterbury College, is here given in full:— Returns of overseas trade published for the last quarter and for tho year 1930 show a continued fall in the values of both exports and imports, and a continued, though slight, improvement in the trade balance. Exports for the year wepe valued at £44,914,778, the lowest figure recorded since 1922, and were nearly £11,000,000, or 20 per cent, below the export values for 1929. The fall in wool alone accounted for more than £7,500,000 of this reduction. Imports amounted to £43,025,914, a decline of nearly £6,000,000 from the 1929 total. For the year 1929 exports exceeded imports by nearly £7,000,000; for the year ended June last, imports exceeded exports by little over £1,000,000; while for the year 1930 exports again exceed imports by nearly £2,000,000. Unless aided by heavy external loans, this excess is quite inadequate to cover payments dtie on State and local body debt held overseas, the interest on which amounts to at least £8,000,000 a year. '

Overseas Trade. The following table, which gives totals for complete years ending in successive quarters, sets out recent changes in total exports and imports, and in the balance of overseas trade:—

The table shows clearly the dl*astic reduction that lias occurred in the value of exports Bhipped up to the end of 1930, It gives little indication, however, of the value of exports fori the current season, for most of these > will be shipped in the first two quarters of the current yefar. For the December quarter of 1930 the average of the monthly official index numbers of ex-' port prices was 26 per cont. below the same average for 1929, and 33 per cent, below similar figures,for 1928. Export prices fell during the quarter,' and for December were about 20 per cent, below their average level for the year. If the December quarter's prices are takon to indicate the general level of export values ruling for the expoirt season; and the .quantities exported are the same as last the total value of exports for 1930-31 would be about 20 per cent, less than for 1930; - that is, they would be worth about £36,000,000. If 1929 values are taken as the basis of com* parison, then, as prices for 1930-31 are about 33 per cent, lowor, values might be reduced by one-third to £37,000,000. It is probable, however, that some produce held over from last season might be shipped, and possible that production has. increased, Jhenee such calculations can only 'be approximate. ' But it ia fair tc conclude that, in view of the severe fall in export' prices, the total value of exports for the year ended June next is unlikely to exceed £40,000,000, and; may -be appreciably less.

Trade Balance Improving. The table shows, too, that though exports fell heavily during the year,' imports declined by a greater amount, i and the balance ' of trade was improving towards the end of the year/ The reduction in imports has been due part; ly to higher customs duties, partly to the heavy exchange premium pajfoble on imports, but perhaps chiefly to, the reduction in purchasing power and the anticipated further reduction consequent upon lower export values. Thq further drastic decline in export values for, the current - season has not yet' hadits full: effect either-'upon ; purchasing power or upon the trade Teturns. The total export values fortbe present season must fee substantially lower than for'the past season, and it follows that further substantial, reductions in imports are inevitable. They appear likely to be brought about by a reduction in domestic purchasing power that must affect internal: trade as well.

• The reduction in both exports and imports during 1930 lias been accompanied by a significant, change in the direction of overseas trade shown in the next table.

The table shows that, in a. year of general depression and falling prices, the United Kingdom has taken n.n additional GJ per cent, of our exports, While.- foreign countries have taken 51' per cent.: less, and other British countries (Australia and Canada mainly) 1 per cent. loss. In', return we have taken 1 per cent, more of our imports from the United ( Kingdom and 1 per I cent, less from foreign countries. The I figures indicate our extreme dependence upon Britain, particularly as a market for our- exports, and suggest that this dependence is increased in times of' difficulty. j Banking Returns, The' next table sljows thß total de- . posits and, advances of the banks, togetter with the margin between de*

nosits- and advances, in the December .quarter 'for the last six years:— £ MiHiona ~

These figures show that while total deposits are half a million less than in the last quarter of 1928, advances (including discounts) are more than eight millions greater, so that the excess in favour of. deposits has declined by eieht and three-quarter millions. If weekly returns are taken for the second woek in January (the latest available figures) the comparisons are as follows: £ millions. (a

These figures show that, comparing January figures, deposits have declined £2,500,000 since 1929, while the bankß have increased advances to their customers by £7,250,000, and the excess of deposits over advances has declined during the two years by about £9,750,000. Normally this decline in advances should continue till about the end of the June quarter, and tho reduction in advances may be greater because for many transactions less finance is required at the lower prices now ruling. But tho difficult period for credit is likely to occur in the second half of the year, when production will require to be financed largely by credits. Internal Trade. The relation between bank deposits and advances is governed largely by overseas payments, and the above figures reflect fairly adeqdßely the course of overseas trade. The best indication of internal trade is probably that given by the weekly returns of bank debits to all accounts shown in the next table: —

The table shows that on average over the last six months, weekly bank debits have been 8 per cent, less than for the same period of 1929. If the comparison is limited to the December quarters, the decline has been oirer 15 per cent., while if the months of December alone are 1 compared, the 1930 figures are 20 per cent, below those of 1929. The rapidly increasing margin between the 1929 dnd 1930 figures suggests both a considerable relative decline in business activity daring recent months and a lessening of the volume of money circulation on account of the fall in values. "

Attention .has been given repeatedly, in these bulletins to the recent increases in fixed deposits and the decline in free deposits. /The movement has been continued in the last quarter and a new law record proportion of free deposits has been reached, the' free deposits, £18,600,000, being, only 67 per cent, of the fixed deposits. £32,770,000. There has been.no bank credit deflation in New Zealand to account for the falling off jin internal business activity; on the other.hand, the amounts of, both bank deposits and advances are appreciably higher than the averages of recent years. But there is evidence that much of this credit is frozen, both in advances which borrowers cannot at present repay, and in fixed deposits which under present circumstances depository will not use directly in business because they can find no extension of enterprise in which they can use their funds both safely and profitably. It appears that the decline in the amount and proportion of free deposits is closely associated with the "course ;of depression in New Zealand, as in other coun- > tries, and that any further contraction' of the field of enterprise'within which funds may be used: with, security, and profit is likely to bo accompanied by a reduction in the proportion of free deposits and a lessening both of internal business activity and of the production, employment, etc., which depends'' on that activity. Conversely, any extension of the field for the safeand profitable use of money is likely to promiote an increase in the proportion of. free deposits together with increases of business activity, production, and employment.

The Present Position. Other indicators of the -trend of business within New Zealand point generally, up to the present, to a continued decline, and, in view of the extremely low export values ruling for the current season, it is difficult to see Jhow recovery, can begin before the receipts from next year's exports become available. , The usual seasonal increase in employment- has &ot bpen in evidence this summer, and the trade'union estimates of the percentage unemployed, covering 54,000 employees, have increased steadily from 64 per cent, in November, 1929, to 15$ per cent, in November, 1930. The Government Bureau figures show much greater increases, but are plainly not comparable, i owing to variations in the proportions of the unemployed registering. According to figures published in the "Mert cantile Gazette," Post Office Savings I Bank deposits for the year 1929 exceeded withdrawals by £856,000. For 11930, withdrawals, exceeded.' deposits t by more than £4,000,000. which is a | record for the Savings Bank. , I Comparisons of certain other signii ficant figures for the last six months of 1929 and 1930 are as follows:

All the above' >how different aspects of the 'development of depression. ..All are due directly or indirectly to the severe fall in export prices last year and the still lower returns this for the season's exports. According to theofficial index numbers published in the monthly Abstract of Statistics, all export pricos averaged for December last 8$ per cent, below' their level qf 1914; of the most important items dairy produce was l'per cent, and wool 45 per ceijt. below the 1914 level, • Wool prices have risen. slightly in the producing countries since December, / and it is anticipated that further rises may follow. But. part at least / of the rise is .due to movements of exchange rates, and it appears very unlikely that expott pricejs will rise in the near future to an extent sufficient to cover the : present level of costs in: New Zealand.

With,, export prices belpw leveis, all retail prices remain 55 per cent»* above that' leyel, "while wbekly wages, are 66 per cent, and hourly...wages' >75 ; per cent, above their, lovels £or 19J.4. , Downward Trend, of Prices. ~"*~" Neglecting the ups and downs 'ofi. price, cycles, there has been a fairly , steady downward trend ■ of . prices, throughout the world since* ,1925.. > In. Britain, where 80 per cent, of our ex*, ports are marketed and nearly half of our imports are purchased, average wholesale prices have fallen about 30 per cent, since that year. ■ heavy fall in British prices has affected' ..Ncjw Zealand's exports, and has been aggro- 1 vated by the wider fluctuations and greater recent fall in the prices staple products. Meanwhile costs of production, set at high, levels Jby -the boom conditions that followed the war, have been ' maintained - or 1 . increased;, Both taxation and _ wages; have risen, enterprise in many industries -has",been shackled by the minute regulation- imposed ' under awards, snd . protection has been increased. The general result of the combination of falling prices on the one hand and high and increasing costs and shackled industry on ,the other has been a progressive narrowing of the field withinSvhich business enterprise can profitably be carried on. It, is the contraction of. this field of. enterprise that is the - main cause of. the increasing unemployment and' general depression that have marked,the last five years. The Government, neglecting . the fundamental prinaiplq that unemployment can be permanently

cured ojuy-oy-tae iu pro ate industry, which can ocuir ojly if su?h industry is maije both secure and profitable, has endeavoured to meet the position by lavish expenditure on public worlssj many, of-jwhich were uneconomical, uud Ins ■ 'jeoosequkntly increased hotb culfies and'the difficulties »«>£* ; paying producers whose 'heavy 'ftardena'-1 vera already a prime cause bf.tfce ' tion it was sought'.t^ r J recent heavier declines 1 have made, the situation . £ty# ;< have now reached > mast be-called: . With I 'at present levels, or at the levels probable in tho near future?, the* community, ? can no longer carty theiburden ,'of-cdats - at present imposed.' It'must ,b«,i admitted that costs *of production 1 «mi be met only by the sale:p£ of industry, and tliq,t ( vheii unit costs must also tion will be stifled which dcpcqds on production, must decline. - r .«*yj7 Seduction In some measure,, th'e been met in the past-by those who have increased prootn otio4} '*P 0r - aero, per unh of stock, and per pound of expenditure. But', the preseSit;level of export priced » ho' l<Wp' that^wsh 1 farm production 'must fail oplesß costs be drastically reduced. 'farm production pi contracted* patt?'pfr v tte? market for sheltered is gone, hnd b«th production and-em-pToyment are likely to be eoptuetpd proportionate^.' JSho"

IWW*. WUMIUW^J

£ Millions. » © 4-» 00 *1 ® o O & w © ..As& v Pk 1928— March .. 54.9 44.4 10.5 Juno .. 55.6 43.5 12.1 Sept. .. 56.2. 44.1 12.1 Dec. .. 56.2 44.9 11.3 1929— March. .. 5711 45.1 12.0 June .. 56.2 46.5 9.7 Sept. .. 56.2 48.2 8.0 'Dee. .. 55.6 48.8 6.8 1930— March .. 49.0 49.1 0.1. June .. 47.6 48.8 1.2 Sept. 47.1 45.8 1.3 Dec. .. 44.9 43.0 1.9

Direction of Trade. Exports. , Imports. 1329.1930.19291930. p,c. p.c. p.c. p.c. United Kingdom 73.7 80.2 46.2 47.3 Other British countries .. 11:7 10.8 21.6 21.5 Foreign countries 14.6 9.0 32.2 "31.2 Total 100 100 100 100

R 0? . • . 2 rS 4) 5* y* a s W s O tf c« o 5? ft* " o o n § <53 © -a So* A o1925 1926 ft Ct P > w W rrt 49.73 46.62 48.55 51.27 1.18 4.65, 1927 47.47 49.76 — - 1.29 1928 53.73 48.10 5.63 — . 1929 55.01 53.80 1.21 —■ 1930 53.23 56.38 — 3.15

M . 09 O BO tn a> £ >* © u <y 05 *M tn 2 03 O £ P< M <u o m « * § o c5 ® > n3 rt A <y ■ M'S ft « <M t-3 1929 . ft -< Hfi W<J . 55.93 46.72 9.21 1930 . . 55.90 53.28 ' 2.62 .63 1931 . . 53.32 53.95

A millions 1928. 1929. 1930. July- . 18.63 20.38 19.85 August . 17.87 19.85 18.79 September . . 16.91 19.90 21.51 October . 19.25 19.61 17.93 November . 18.85 21.17 17.70 December . 22.89 23.35. 18.60 Average per 19.07 20.72 19.06 cent of 1929 . 92 100 92

£ millions. Decline 1929. 1930. p. cent. Building permits 4.61 2.49 46 Land transfers 15.81 13.31 16 Mortgages registered .. 21.19 17.59 17 ' Mortgages dis4 ' " charged ... 15.fe0 ■ 11.12' ,29 Totalisator investments (five months) 3.14 - 2:36 *~~25 <"