U.S.A. BUSINESS CONDITIONS

Hokitika Guardian, 18 September 1930, Page 3

U.S.A. BUSINESS CONDITIONS

NIOW YORK, August. 2". The experience of the first six months of 'this year would har tfie hope that the month of July might inaugurate any marked change in tile business situation. The failure of the Spring months tq show sustained trade improvement has a pronounced effect upon sentiment, in business circles in June, as reflected in lower prices in the stock and commodity markets. Crop prospects were for large yields, which in view of existing supplies exerted a depression rather than a cheering influence. Reports 'from othercountries told of increasing unemployment and emphasized the world-wide extent of the trade recession. Under the circumstances, the usual custom of suspending or slackening industrial operations in July naturally has been fully observed and the general attitude has been that of waiting for developments, rather than of attempting to start developments.

When a pronounced business reaction is unmistakeably under way, caution r.ules in all quarters until the measure of the movement has been taken. For the time being new committments are avoided and business is reduced largely to the routine of supplying current demands, working oft' existing.stocks, making, collections, and reducing expenses., It is a. time of doubt and uncertainty, and naturally the volume of business. falls much below what it is when a spirit of confidence and enterprise rules. Moreover, it declines because conversation and economy rule not only in the direction of business but in the management of private affairs. There is a great difference in the expenditure of the American people between a period of easy confidence and optimism and a time when they have the will to economise, and this difference is no small factoi in the fluctuations that occur 'in the volume of business. It would be a fine thing! to stabilize business, but the business situation as a whole is what the millions of people make it in the management of their private affairs. CLEARING OUT OF STOCKS.

On the down turn the inevitable policy of playing .safe, reducing stocks and expenditures, has an increasingly depressing influence upon the volume of business and prices until the bottom is reached. Costs have little relation to prices so long as surplus stocks are hanging over the market; moreover, costs are undergoing revision at such a time and uncertainty exists as to future prices. However, the situation begins to improve when dealers’ stocks are reduced, to the point where further sales must be offset by purchases from original sources. Once accumulated stocks are out of the way, production becomes more closely related to consumption and the first stage of stabilisation has been reached. There is reason to believe that production in many manufacturing industries in recent months has been below current consumption, which would /mean that dealers’ stocks are being cleared out and that the increased retail trade oil the Fall months probably will call for higher industrial activity. It is known that automobile production has been restricted with a view to reducing dealers’ stocks of both now and second hand cars, and that good progress to that end has been made. Information concerning stocks in other lines is not so definite, hut generally in trade circles the belief prevails that an increased rate of production will be soon required to meet the requirements of retail trade.

In short, the downward trend of business while , uncertainty and fear are the dominating; influence, is a well known phenomenon, and so is the upward trend when production and consumption have gotten into close relations again on a conservative basis. From that time on constructive influences dominate with growing strength and gradually build up a new orosperity on a sounder basis than before.