THE AMERICAN BOOM
By NICHOLAS DAVENPORT
W'E mug all be grateful for the American boom. Our exports to North America in October were a record, being 111 per cent. ° our total. Shipments to the United States alone were over £19 million-34 per cent. More than the monthly average for the first three-quarters of the year. Without this spurt it would have been very difficult to kc hieve even the present precarious balance 0 our international account. We should therefore be as anxious as any Wall Street stockbroker to know whether the American °om is likely to continue. Its chances of survival certainly seem greater than those of
own boom. It has been kept much more
icier control; it has not had to be halted b ir such drastic monetary measures as Mr. lintler has adopted. In other words, it has )I created such a shortage of labour and Materials that the authorities have been forced to try to induce a recession. The
edit squeeze has been severe only in the
)using industry, where it was necessary to en private house-building; which is, in fact, 11)W slowing down. This has removed one Potential source of inflation, but another 3 ill exists in the increase in instalment buy-
(hire purchase). Consumer spending,
Wh
-.I ch has been the basis of the boom, in- (teased from an annual rate of $2501 bil- li°nn to $2561 billion between the second and bte third quarters and this increase of $6 eolion was largely financed by instalment rrowing, the increase in disposable in- conies being less than $5 billion. This infla- °nary element the authorities are watching oluselV, having applied the brakes of dearer kid — tighter money. Dr. Burns, the Chair- 'Ilan of the Council of Economic Advisers, believes that the tendency towards too easy tedithas about run its course—that the tIllitlity of both house-mortgage loans and consumer instalment loans has improved. 41PP1ly, there is no sign of a speculative keurnulation of stocks in either manufac- turers' or dealers' hands. The rate of 'inven- !?rY accumulation' has lately declined. ,here has been a 40 per cent, reduction in there
stocks of 1955 cars which are now o
Y slightly above those of a year ago. So i4r. Burns sees 'significant signs of progress 311 the struggle to maintain conditions of ,ktained prosperity in our times.' But he ',cols that in an economy like ours, poised itirtc, a high plateau, neither the threat of i.nation nor of recession can ever be far 'stant.'
b.ft looks as if this phenomenal boom will 'Wing on into the first half of 1956. It had Ithen feared that the President's illness and [ie Possibility of a Democrat in the White °It.se would cause the business world to :at as capital expenditures. But not at all. '4Pital programmes are now being ex- caded. One authoritative estimate is for an I'llerease of 13 per cent. All the same, it \vaYs makes me anxious when no one in aneriea can find any reason why the boom itnould end. It savours too much of 1929. ',11_ the third quarter of the year the total glItPut of goods and services, increased by tiper cent to an annual rate of $392 billion. thl" is between two and three times higher k an the normal rate of growth and it would "e Unwise to expect the economy ao gallop
for long at this pace. After all, most in- dustries will be brought up against the physical limit of full employment of labour and materials. It is a relief almost to see farm incomes still declining and one section of industry underemployed. A farm reces- sion is not likely to bring on a general re- cession. As for Wall Street, there has been a substantial recovery from the sharp 10 per cent. decline which followed the Eisen- hower heart attack. Excellent earnings and year-end dividend extras from all industries except aircraft production and electrical equipment are restoring investment confi- dence. In some cases the increase in profits over 1954 have been spectacular, for exam- ple in steel (up 105 per cent.) and air trans- port (up 92 per cent.). Some excitement was caused when Standard Oil of New Jersey announced a three-for-one split (i.e., bonus) and a raising of the interim dividend. This stock is perhaps the most widely held in America and the most popular with the pension funds. It looks as if new 'highs' may be seen on Wall Street and then a selling off as the professionals discount a slowing down of the economy in the second half of 1956. How we envy the Americans not to have to endure autumn Budgets and periodic crises in the balance of payments!
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