EXPORTS AND AN AMERICAN RECESSION •
By NICHOLAS DAVENPORT AMERICAN economists are busy debating the question whether there will be a recession in the United States this year. The answer is of vital interest to ourselves because a drop in our exports to North America at this junc- ture would be disastrous. The visible trade returns for January are depressing enough With their deficit of £74.2 million. They show no reduction in the swollen import bill : in fact, imports were 34 per cent. more than the monthly average for the last quar- ter of 1955. Exports were only 1 per cent. less (and 64 per cent. above the average for ,1955 as a whole) but it is disappointing to find that exports to the United States were 11 per cent, below the monthly average for the last quarter of 1955. In the face of the rising import bill it is amazing that Mr. Macmillan does not immediately give notice to the OEEC that he is lowering our European import quota from 85 per cent. to, say, 60 per cent. until our deficit with the _ PU (now over £100 million) is cleared off. The liberalisation of trade in Europe was never intended to put a member country 'in the red' on its international account. Stricter Control over dollar imports is also required. And if Mr. Macmillan finds that the intended disinflation of the building trades is not working out as he'expected, building licences will have to be restored for the emergency. For, make no mistake, an emergency has come. The word 'crisis' Which Mr. Butler refused to use is now on every one's lips in the City. But to return to the economic debate in the United States. Professor Arthur Burns, „the present chairman of the Cotincil of Economic Advisers, is mildly optimistic, While Mr. Fidwin Nourse, who was chair- loan under ex-President Truman, is F,,lefinitely pessimistic, believing that a 15 to -0 per cent. drops in business activity is not unlikely. Wall Street, which has been going ,down more often than up, is behaving as if inclined has not yet made up its mind but is half olelined to take the side of Mr. Nourse rather than Professor Burns. Automobiles, housing and inventories are the debatable Points. The automobile industry over- Produced last year with an out-turn of 8,000,000 cars and is now working a four- (1_,ItY week, trying to equate supply with demand. Yet stocks in dealers' hands con- tinue to mount—together with the un- e,InPloyed in Detroit. Mr. Harlow Curtice, the President of General Motors, who, with 4 Voss income of $686,000 a year, has to be economical of prophecy, has endorsed an estimate that production of cars for the home market will fall this year by 16 per !ern. So far the steel industry has had 411flcient orders to offset the smaller demand from the automobile industry: it eXn0 ctS to kelp operating at near capacity for the first half of the year but beyond that it is uncertain. As regards housing, new !lousing 'starts' fell in December for the fourth month running and were the lowest since the middle of 1954. To counteract is decline the Government has extended the term of Government-guaranteed °°l mort- rfges from 25 to 30 years. There is also ,e apprehension about the recent ‘tecumulation of stocks in the hands of mlnufacturers but Professor Burns's Coun- sees 'little evidence of excessive or speculative inventories', apart from the automobile industry. Merchandise sales in January, if cars are excluded, were reassur- ing. However, the rise in consumer credit from $30,000 million to $35,000 million last year has worried the Government so much that it would like the Federal Reserve Board to regulate consumer credit in future. On the whole, the Council of Economic Advisers feels confident that while con- sumers may buy fewer motor cars and houses this year their aggregate spending will continue to be upward. Mr. Nourse on the other hand profoundly disagrees.
It seems to me to be a question of con- sumer confidence once again. Confidence may be upset if President Eisenhower decides not to run for another term. Or it may be upset if Congress throws out the budget or the farm bill. So many times in the past something has happened on the political front to weaken the confidence of the business man in the future and cause him to reduce his capital spending pro- grammes with the result that a minor reces- sion follows. This is an election year in the United States and anything might happen— except, it seems, another boom. The Ameri- can market for our exporters is not going to be easy.
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