Slump, Recession or Disinflation ?
As soon as it became clear that one of the causes of the latest British dollar difficulties was a falling off in American purchases, speculation over the exact ssate of the United States economy became active. Just what importance was to be attached to an increase in the numbers of unemployed by 5.700,000 in the course of a year and a decline in industrial production by 53 per cent. since the peak reached last autumn ? The wilder surmises were stilled at once. It is not a slump. None of the really alarming symptoms—catastrophic fall in share prices, credit stringency, bank- ruptcies, collapse of confidence and so on—was present. According to Mr. John Snyder, Secretary of the United States Treasury, it is not a recession either. In the sense in which Mr. Snyder used the word "recession "—meaning a mild slump—he was no doubt right. The real point is that Mr. Snyder sees nothing unhealthy, or un- controllable, in the present downward movement in American busi- ness. It may indeed be healthy, in that there was an inflationary element in the position last autumn and this element is now in course of removal. One question remains—can the present movement be controlled so that it does not develop into something more serious? That question has been firmly answered in the mid-year economic report which President Truman presented to Congress on Monday. The President's advisers, fortified by a most careful assessment of the available data and by years of close study in anticipation of just such a contingency as this, are confident that the existing situation is not serious and Government policies can prevent it from becoming so. America is going through a period of controlled and healthy adjustment—which is perfectly all right for Americans. But the adjustment is downwards and, such is the state of the British economy, a very small downward adjustment in American purchases Is more than enough to cause grave trouble here. We certainly have no excuse for waiting for a storm signal from across the Atlantic before cutting costs and tightening up efficiency. The sad truth is that the slightest flicker of the barometer needle from set- fair should be enough for us.
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