TRADE POSITION

Press, Volume LXXI, Issue 21417, 8 March 1935, Page 6

TRADE POSITION

IMPROVEMENT SEEN CHAMBER OF COMMERCE BULLETIN Improvements in internal trade and other favourable factors are noted in the latest bulletin prepared for the Canterbury Chamber of Commerce by the economics department of Canterbury College. The bulletin, which discusses the present trend of business in New Zealand, is as follows: The overseas trade figures for 1934, both for exports and imports, are decidedly higher than for the three preceding years. Exports reached their lowest level in 1931 at £N.Z. 35.2 m. and in 1934 reached £N.Z. 49.6 m. Imports were lowest in 1932 at £N.Z. 24.7 m., and for 1934 totalled £N.Z. 32.5 m. Detailed figures for exports, imports, and the balance of trade over recent years, together with the approximate exchange rates ruling against sterling in each year, are as follows: NZ. Millions (including specie). Ex- ExEx- Im- cess of change Year ports, ports. Exports. Rates* 1929 .. 55.6 48.8 6.8 101 1930 .. 44.9 44.3 0.6 103* 1931 .. 35.2 26.5 8.7 110 1932 ~ 37.0 24.7 12.3 110 1933 .. 41.3 26.0 15.3 125 1934 .. 49.6 32.5 17.1 125 •Trading banks' approximate average selling rate for cable transfers on London. Imports of Silver The figures for the latest year are swollen by the large trade in specie, particularly during the last half of the year. Imports of specie for the year amounted to £1,242,000, an exceptionally high figure, due mainly to the importation of the Dominion's new silver coinage. Exports of specie amounted to £2,284,000. This amount probably included a good deal oC English and Australian silver coin replaced by the Dominion coinage, and aiso that part of the gold taken over by the ReserveBank which has disappeared from the bank's return and has presumably been exported. Since specie is valued in the trade returns at its face value; while the market price of gold in New Zealand currency is more than double the face value, it is probable that the export figures understate the actual receipts. The next table sets out the trend of trade in greater detail by giving the figures for complete years ending in successive quarters. The values arc in New Zealand currency, but exclude specie. The figures therefore represent the New Zealand values of merchandise exported and imported. Overseas Trade £N.Z. Millions (excluding specie). Excess Year Ex Im of Exended, ports, ports, ports. 1932 March .. 33.9 24.8 9.1 June .. 34.7 24.6 10.1 Sept. ~ 35.1 24.3 10.8 Dec .. 35.6 24.6 11.0 1933 March .. 37.5 35.0 12.5 June .. 37.5 25.3 12.2 Sept. .. 39.8 25.4 14.4 Dec. -.. 41.0 25.6 15.4 1934 March .. 4.6.0 26.1 19.9 June .. 49.1 26.7 22.4 Sept. .. 49.3 29.0 20.3 Dec. .. 47.3 31.3 16.0 The figures show a continuous increase of exports up to September last, but a decline of ,£N.Z. 2 m. in the latest quarter. The decline is due partly to the fact that wool prices are lower than a year ago and partly to a reduction in the volume of exports. In view of the present dry season and the lower level of wool prices, a further decline in total export values for the present export season is to be expected. Imports have increased throughout the last year, and, for the year as a whole are 27 per cent. greater than for 1933. Most of the increase has occurred during the latter half of 1934. Owing largely to this increase in imports the excess of exports has declined since June last, but is still considerably larger than is needed to meet payments of debt services, etc. There is, therefore, still scope for expansion of imports, even though export totals should fall somewhat further. The next table compares the volume and value of our chief exports over the last two years. Chief Exports—Volume and Value (Figures in Thousands.) Volume. Value. 1933. 1934. 1933. 1934. cwt. cwt. £N.Z. £N.Z. Wool .. 2.556 2,284 7,422 12,516 Lamb .. 2,823 2,584 6,678 7.903 Mutton .. 993 902 1,310 1,595 Butter .. 2,635 2,614 11,649 10.043 Cheese .. 1.983 1,984 4,766 4,694 The figures show that, except in the case of cheese, which has remained practically stationary, the quantities of all our chief exports declined last year. Despite a decrease in quantity, higher wool prices brought an additional £N.Z. 5 m., while the increased value of meat was practically balanced by the fall in the value of butter. Export volumes, however, are still about 25 per cent, higher than in 1929. The next table deduces the volume of total exports from a comparison of export values and export prices, and shows the changes both in the total volume and in the volume a head of population, that occurred since 1929. Similar calculations are made in the case of imports. In both cases specie is excluded. Exports 1929—100 (Excluding specie.) Indexes of Vol. Value Value. Prices. Vol. per per £N.Z.m. head. head. 1929 .. 54.9 100 100 100 100 1930 .. 44.9 79 104 103 81 1931 .. 34.9 61 105 102 62 1932 ~ 35.6 55 118 114 63 1933 .. 41.0 56 134 128 71 1934 .. 47.3 69 125 119 82 Imports 1929—100 (Excluding specie.) Indexes of Vol. Value Value. Prices. Vol. per per £N.Z.m. head. head. 1929 .. 48.7 100 100 100 100 1930 .. 44.3 99 92 91 90 1931 .. 26.5 99 54 53 53 1932 .. 24.6 96 52 50 49 1933 .. 25.6 101 52 50 50 1934 .. 31.3 100 64 61 61 The figures show the steady increase in the total volume of exports up to 1933 and the decline in 1934. In the case of imports prices remained much more stable, but the volume of imports fell in 1932 and 1933 to a little more than half what it had been in 1929. The latest year shows a substantial increase of nearly 25 per cent, over the two previous years. Despite this increase, however, the figures indicate that, relative to 1929, the Dominion is sending out 25 per cent, more exports, and is taking in return 36 per cent, less imports. The disparity is due largely to the difference in price movements, which means that the Dominion must now export 45 per cent, more produce than in 1929 to pay for a given quantity of imports, or to meet a given amount of interest payment. Banking Over the past year exports have fallen, while imports have increased, but the balance of trade still shows a margin more than sufficient to meet other payments due abroad, and in consequence funds have continued to accumulate. Even excluding the change in the trading bank returns occasioned by the transfer of Government deposits to the Reserve Bank, the increase in deposits and the decline in advances has been continued. The trading banks' returns for the De-

cember quarter of the last six years are as follows: Trading Banks' Returns £N.Z. Millions Excess Excess Dec. De- Ad- ofDe- of AdQr. posits, varices, posits, varices. 1929 .. 55.0 53.8 1.2 1930 .. 53.2 54.4 1.2 1931 .. 52.0 51.0 1.0 1932 .. 51.9 50.2 1.7 1933 .. 59.3 43.8 15.5 1934 . . 61.5 42.4 17.1 The table shows the total deposits now amount to £N.Z. 61.5 m. But the figure for the December quarter, 1934, is not strictly comparable with the preceding figures, as it omits nearly £N.Z. 6 m. of Government deposits transferred to the Reserve Bank. If this amount were included the last figure would be £N.Z. 67.4 m. The advances throughout the table are comparable and have declined by £N.Z. 12 m. since 1930 to the low figure of £N.Z. 42.4 m. for the December quarter, 1934. The trading banks' returns thus show an excess of deposits amounting to £N.Z. 17.1 m. If the Government deposits at the Reserve Bank were included, this figure would be V £N.Z. 23 m. Such an excess of deposits is abnormally large and indicates an exceptional abundance of funds awaiting employment. The transfer of Government deposits from the trading banks to the Reserve Bank makes a significant change in the quarterly bank returns, a change that must be allowed for in comparing total deposits. The Reserve Bank's weekly returns provide more frequent and additional information in the banking field. The next table presents important figures from these weekly returns for the ends of each of the last five months. Reserve Bank of New Zealand £N.Z. Millions Sterling 1934 Deposits. ExEnd of Govt. Banks. Gold, change. Aug. .. 3.3 16.5 3.2 24.5 Sept. .. 4.4 15.9 4.4 24.5 Oct. .. 5.0 12.7 3.2 23.2 Nov.. 6.4 10.7 3.0 23.6 Dec. .. 6.7 9.1 3.0 22.1 These figures show considerable variations. Government deposits have increased steadily throughout the period, while bank deposits have fallen. Gold reserves accumulated until the transfer from the trading banks was complete, and the decline in the figures since September suggests that about £N.Z. 1.4 m. has been exported for sale abroad. Sterling exchange has also declined. A survey of the figures as a whole indicates that trading bank deposits have been reduced, partly by the transfer of funds to Government deposits, partly to pay for increased notes, and partly to meet the demands for sterling exchange consequent upon the repatriation of funds left in New Zealand pending a decision on the exchange question. Such repatriation of funds would account for the decline in the sterling exchange holdings of the Reserve Bank. The next table sets out the weekly averages of all debits to trading bank accounts quarterly for 1929 and the last three years. In earlier bulletins it has been usual to include debits to government account as giving a wider picture of financial transactions as a whole. But the government account is now held mainly at the Reserve Bank and the weekly figures for debits appear to be confined to the business of the trading banks. Bank Debits (excluding Government) £N.Z. Millions Weekly Average for quarter. 1929. 1932. 1933. 1934. March .. 19.1 11.3 UM 14.2 .Tune .. 16.9 10.4 10.5 13.4 Sept. .. 15.2 9.2 10.0 11.6 Deer. .. 16.6 10.3 11.3 12.0 Average .. 16.9 10.3 10.fi 12.3 1929--100 . 100 61 64 76 The lable shows that the volume of financial transactions, as indicated by I these debits, declined by 39 per cent, between 1929 and 1932. Since then the index for the complete year has risen from 61 to 76, or by about 24 per cent. The figures for 1934 are. however, somewhat unusual. In the firs', two quarters the increase was very great and was probably accounted for largely by the higher prices paid for wool and meat. .In the last two quarters there is still a decided increase over the levels of 1932 and 1933, but the increase is less. It is difficult to say how far these figures retlcct the improvement in internal busines.-', but the percentages covering the year as a whole seem to give the closest approximation. Internal Business The evidence of improvement in ii.ternal business given by the expansion of bank debits is strongly supported from a number of oilier sources and particularly from the increase in the Hjtal value of production and the expanding vield of the sales tax. The figures for the value of production m New Zealand have recently been revised, and the latest return may be summarised as follows: — Value of Production £N.Z. Millions Pastoral and Dairving. Factory. Other. Total. "128-29 72 4 24.0 30.2 126.6 1929-30 .. 64.5 25.6 30.8 120.9 1930-31 .. 46.8 23.3 27.5 97.6 1931-32 .. 41.2 18.6 23.8 83.6 1932-33 .. 41.6 17.7 24.5 33.3 1933-34 .. 54.6 18.6 25.6 98.8 These figures show that between 1928-29 and 1931-32 total production fell from £N.Z. 126.6 to £N.Z. 83.6 m., a decline of 34 per cent. For 1933-34 the total is £N.Z. 98.8 m.. an increase of 18 per cent, for the lowest level. The fall was heaviest in the case of exported products, and from the highest lo the lowest levels, pastoral and dairying products declined by 43 per cent., factory products by 31 per cent., and other products by 23 per cent. A substantial increase in the value of pastoral and dairy products is shown in the latest year. This is clue partly to higher prices and increased quantities, and partly to the depreciation of New Zealand exchange. Since the fall in the value of exported produce preceded and was undoubtedly the chief cause of the decline in other products, which are mainly sold on the local market, it is to be expected that an increase in receipts from exported produce will be reflected in increasing demand for and increasing values "of factory and other products. There is evidence that this increase in products for local consurjpfion has already begun and the trend of the figures suggests that it is likely lo be continued. The next table compares the movements of a number of different series for the December quarter of the last three years. Comparisons for December Quarters 1932. 1933. 1934. Bank Deposits— Govt, £N.Z. m. 1.5 1.1 6.3 Free. £N.Z. m. 15.1 18 6 21.5 Fixed. £N.Z. m. 35.4 39.5 39.4 Note circulation. £N.Z. m. . . 6.0 6.4 6.3 Bank advances, £N.Z. m. . . 50.2 43.8 42.4 Totalisator investments £N.Z. m. (5 months) . . 1.37 1,55 1.55 Share price index 72 89 101 Exports, 1000 tons 179 202 207 Imports, 1000 tons 387 391 459 Coastal shipping, 1000 tons . . 329 349 381 Railway ton miles. million (84 days) 75 86 90 Land Transfers— Number .. 4140 4460 5210 Value, £N.Z.m. 2.70 2:63 3.31 Mortgages— Registered No. 3770 3550 4210 Value. £N.Z.m. 2.70- 2.35 3.80 Building Permits— Number .. 1910 2140 2290 Value, £N.Z. m. .55 .74 99 Sales tax, £N.Z.m. These figures show improvements in almost every case during the last two years, and, taken together, furnish very strong evidence of expanding business. Government deposits have increased to

exceptionally high figures. Free deposits have expanded from £N.Z. 15 m. to £N.Z. 21i m. during the last two years, while fixed deposits have also increased by about £N.Z. 4 m., though the latest returns show a slight reduction compared with the end of 1933. Note circulation in 1934 i~. also slightly lower than a year ago, v hile bank advance's have fallen. Totalisator investments are the same as last year, while share prices have continued to rise and are now 40 per cent, higher than in 1932. The tonnage of exports for the last quarter has increased slightly, while that of imports has increased substantially. Both coastal shipping and railway tonnage are higher, and land transfers, mortgages registered, and building permits have all increased both in number and in value. The yield of the sales tax, which should provide a very good indication of the state of internal trade, was more than 20 per cent, higher for the last December quarter than for the same quarter of the preceding year. While indications such as these provide substantial evidence of definite improvement in internal business in New Zealand, there is as yet little sign of any definite upward movement of prices throughout the world. In fact, over- the world as a whole, prices remain remarkably stcad3< r at low levels. During the last year there has been a very slight fall in the gold countries and a slight rise in America, Britain, and most other countries off gold. Prices for New Zealand exports were about 22 per cent, better in 1934 than in 1933. but prices at the end of 193-1 were nearly 10 per cent, below the average tor the year. The movements of prices for the chiet export groups and of wholesale prices are shown in the next table. Trice Movements, 1939-1934 All Indexes 1909-13—100 Dec. 1929. 1932. 1934. 1934. Dairy produce 146 93 77 73 Meat .. 183 111 152 161 Wool 171 62 127 75 Other pastoral products .. 170 62 89 78 All pastoral and dairy produce 163 87 109 99 All exports . . 162 89 11) 101 Wholesale prices 149 130 133 134 Dairy produce prices, which have been very low, rose sharply about the end of the year, but the rise was due largely to low supplies caused by drought in the Northern Hemisphere and to the effect of the abnormally dry season on production in New Zealand. It is possible that production will be so impaired that, despite the Higher prices, total receipts for the current season will, be lower. Meat prices have been satisfactory throughout the year, but London prices have recently declined. Wool prices, aided by the rise in exchange, more than doubled between 1932 and 1934, but the December sales show a decline of aooui; 40 per cent. Average prices for the whole of our exports are now about the level of the five pre-war >ears. Wholesale prices have risen slightly in the last two years following upon the improvement in export prices and the imposition of the sales tax. The disparity between internal prices and export prices, which has been an important factor in curtailing business, is less than it was in 1932, out it is still serious. Past experience has shown very plainly that the export industries usually suffer first in a depression and are generally the first to recover. Important export industries improved substantially in 1934. but it appears certain that the present season's receipts for exports will be less than last season. Internal trade has begun to improve, partly in reaction from the low depression levels, and partly in response to the demand stimulated by the abundance of money and by the high export receipts of last season. Both internal trade and import trade have much leeway to make up. Money is plentiful to finance expansion and interest rates are low. Lower receipts for exports during the current season must have a retarding effect on the expansion of internal trade, but it seems improbable that this effect will be sufficient to offset the more favourable factors making for improvement.