The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES.” TUESDAY, NOVEMBER 28, 1939. TRADE AND FINANCE

Gisborne Herald, Volume LXVI, Issue 20106, 28 November 1939, Page 6

The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES.” TUESDAY, NOVEMBER 28, 1939. TRADE AND FINANCE

Official figures issued during the past few days place the trading ana financial position of the Dominion in a more favourable light than has been the case for some years. The trade | balance has been improved as a result ! of both an increase in the value ot

exports and a decrease in imports while the sterling funds of the Reserve Bank showed an increase ot £1,750,000 in the week ended November 20. At first sight these two

trends might seem to be inter-related and might lead to the conclusion that there has been a rapid and substantial improvement in the economic position of the Dominion. The figures, however, are subject to certain important reservations and require careful analysis if a correct interpretation of the position is io be obtained. The overseas trade returns for October show that exports increased in value by £1,742,000 while imports declined by £940,000, the month’s trade, for the first time since 1933, resulting in an excess of exports over imports. Under normal conditions, however, the figures for any one month are not a reliable guide and under the disturbed conditions of the present time they can be most misleading. Even when they are aggregated in the figures for the rest of the year they are sufficiently abnormal to upset calculations.

Since so much has been heard lately

of the restriction of imports the figures relating to this aspect of the Dominion’s trade are of particular interest. Speaking last week with only the September figures available, the Minister of Finance, taking the results for the first nine months of the year, was able to claim that imports had only been reduced by about £1,500,000. The figures for 10 months, however, show that there was a drop of nearly £2,500,000, but even this period includes months before the real effect of control was experienced. The best guide is obtained by taking the figures for the first four months of the production year commencing July l. when it is found that imports were reduced by no less than £3,500,000, or at the rate of more than £10,000,000 a year. These figures would have considerably upset Mr, Nash’s contentions and explain why workers in the retail trades are displaying so much concern at their future prospects. To some extent, perhaps, October im-

ports may have been adversely affected by war conditions and delays in the arrivals of shipments, but in future there will be dislocations of another kind. Shipments may arrive regularly but rapidly iilcreasing costs will mean that much smaller quantities of .goods are being received for the same amount of money and trade, in consequence, will be reduced in volume if not in value.

On the export side, also, the im-

provement in the position is more ap-parent-than real. '.for the first ten months of the calendar year the value of exports increased by more than £1,000,000, but it appears that this increase is solely due to the demand created by war conditions, because up to the end of August the export trade had been showing a decline over the previous year. For the four months of the production year exports were higher by £1,800,000, but this was more than accounted for by an increase of £1,750,000 during October alone. The large increase in October, in turn, is explained by the expediting of shipments of produce to meet the war-time demand, the result of which has been to clear the stores of frozen mutton for which, in normal circumstances, there would have been no market. This is the chief cause of the apparent improvement in the trading position, but it is obvious .that, in the absence of increased production, of which there is yet little indication, it cannot be sustained. The export position will be assisted to some extent by the somewhat higher prices under which produce has been taken over by the British Government, but this, in turn, will be offset by the higher cost of most items of imports and increased shipping and insurance charges.

The unseasonat excess of exports in

October of £577,000 might seem to partly explain the improvement in the Reserve Bank's holding of sterling funds, but the main cause is an alteration in tending procedure. Under ordinary conditions some time elapses before exports are sold overseas and the sterling funds credited with the proceeds. Now, however, the British Government is making payment as from the date of shipment. In effect, the sterling funds are credited in advance and this explains why London funds increased by £1,750,000 during the last week for which returns are available. This trend is likely to be maintained in the future, but it has the inherent danger of making the sterling position look better than it really is, for, sooner or later, there will be a reversion to the old system and there will be a period of some months during which no sterling

funds will be credited at all. There are other points which must be remembered when increasing London balances might lead to unwarranted optimism. In the first place, more than £1,100,000 is due on January 1 for interest payments, these being the heaviest monthly payments of the year. On top of that, for some time past large quantities of imports have been procured on the deferred payment system and under export guarantees, and sooner or later these sums will have to be met; and. finally, on June 1, Mr. Nash will have to pay his first instalment of loan repayment. The position in the future, therefore, will need to be watched with the utmost care.