Finance—Public and Private
Will Trade Revive ?
0 M at the end of 1925, so at the end of the year which has just closed, hopes were entertained of a trade revival. We know that last year those hopes were doomed to disappointment. Will they be fulfilled a year later? Arpresent the signs are fairly good and it may almost be taken for granted that at the forthcoming .annual Meetings of the joint stock banks the chairmen will sound an optimistic note.
pefore dealing, however, with the prospects of an improvement in trade, it will be a pity, I think, if the Unfavourable figures of last year are lost sight of, because they afford a reminder of the loss inflicted by the pro- trticted coal stoppage, and they should also inspire us to intense effort, so that lost ground may as far as possible be recovered. The results of our foreign trade for December were practically the worst of any month in the , - year, while the aggregate results for the year are the worst recorded in modern times. The value of our imports in- creased by £78,000,000, of which £43,000,000 came micier the unusual head of coal imported, while the value of exports declined by no less than £150,000,000, of which £31,000,000 .Came under the head of coal. Finally, it must be noted that the excess value of imports over exports for the year —that is the visible adverse trade balance—was no less :than 1365,000,000, being £72,000,000 worse than for 1925 and £129,000,000 worse than for 1924.
LOWER PRICES.
. The one . mitigating circumstance, and one which explains the magnitude of some of the declines, is the fact rthat in certain foodstuffs and raw materials lower prices 'contributed. In fact, just one or two instances, the :chief being cotton, the fall in values occurred in the face of a trifling decrease in quantities, and in that particular instance the figures, of course, should be regarded as favourable. Thus, whereas the decline in quantity of raw cotton was not very great, the shrinkage in value was no less than £41,000,000, shipments from the United States alone being less by £16,500,000. Even when all allowance, however, has been made for these circum- • stances, the year 1926 will go down in history as one of . the worst as regards our foreign trade, and, moreover, it followed upon most unsatisfactory results in the preeed- ing year.
INVISIBLE EXPORTS.
It may be perfectly true that if the actual trade balance could be precisely adjusted by a complete knowledge of the value of invisible exports such as shipping freights, financial operations and interest received on our holdings of foreign securities, the balance against us might not be so very great. Many of these invisible exports, however, represent the result of past effort and because the tendency to dwell upon them also tends to diminish effort in creation of new wealth, I am never disposed to give them over- much prominence excepting when taking into considera- tion the factors affecting the Foreign Exchange move- ments.
SIGNS OF IMPROVEMENT..
And yet, after recognizing the unfavourable figures for the past year, I think it is possible to take a moderately hopeful Vie* With regard to the immediate outlook. Indeed, tangible evidence of this is actually forthcoming in the much larger orders in hand in the iron and steel and in the shipbuilding industry, while there are not want- ing signs Of improvement in the Textile industry where 'depression has also been specially marked during recent years.
RANK RATE EXPECTATIONS. • In This -connexion, however, • I think it well to soUnd a note of • Warning with regard to one of the causes responsible for optimism concerning the- trade outlook. I refer to the hopea• of-lower money rates. I have referred on several occasions to a steady-improvement in the gold position at the Bank of England and also to the downwa tendency of money rates at some of the Continent centres. At the moment of writing the opinion is he very strongly in the • money market that before t article appears in print—that is to say, on Thursth next--the Bank Rate will be reduced to 41- per cent. T belief may or may not be verified, but I am certain bound to add that there would seem to be no reason w the Rate should 110i be reduced at once for the disco rate of 4,1 per cent, in the open market—which really the rate which affects the exchanges—is completely o of touch with the official 5 per cent. Rate, and, moreov it looks as though the Bank would add to its gold suppli during the present week, thus making the Reserve from £11,000,000 to £12,000,000 above the level of a year agtk SOME PRACTICAL CUNSIDERATIONS.
But while lower Bank Rates often have an irumedia effect upon price movements of gilt-edged securities, t effect upon trade activity is seldom immediate and is always very marked. We have become so aecusto to find traders complaining that high money rates tend restrict trade activities—which in a sense is true—t there is danger of attaching too much importance money rates as a stimulus to trade. During the year it is not a 5 per cent. Bank Rate which has occasio the deplorable trade figures given above, and it is not -4i per cent. Bank Rate which will put matters rig Much more important and direct factors have operat and, incidentally, it might be well to note that in Amen -where trade has been prosperous, the general value money has been about as high as it is here, while what • perhaps, still more striking is that much of the revival industrial activity in Germany has been financed by lo from the United States on terms which would be regard here as prohibitive for trade prosperity !
ESSENTIALS FOR RECOVERY.
• When, therefore, we arc considering 'hether trade -revive here and 'whether a revival" will go far, I sug„ . that it is to such matters as the relations. between Capi and Labour, better organization in many industries • increased individual effort, to which we have to look an improvement in the situation. Owing to shortage goods in many directions, a moderate revival in trad barring any fresh industrial dispute—seems tu be rea ably certain, but just as I refuse to believe that Eir railways will get back their prosperity simply by rai freight rates, so I believe that the chance of a prolon, -industrial revival -here, with a solution -of the .unemplo. Inca problem, will depend not so much upon the co of money rates as upon economy in the National Expe ture; lighter taxation and a reversal of all the force, whether set in motion by Capital or Labour—which dun!. recent years have restricted output and raised prio against the consumer. .
With chaos in China and with Russia still more of menace than an aid to international trade it is diflie to see how a full measure of world-wide prosperity can reached immediately. • That, however, makes it the mor imperative that consumption should be stimulated lower prices, which in very many instances—hou, repairs and plumbing to wit--would mean not neeessan a lower wage, but more rapid work= and -fewer irksor trade union restrictions :which inipose. unnecessary 0,1 to the householder because of the-length of time o'peupa" and because in mans cases the inefficiency: of the o necessitates its :being done over again very shortly. A so with many other industries, a policy of giving out labour more freely - would -'hring down &es. 'with interference to the age, bring -its stimulittidnbfderaa and do much to -relieve thc.unemplpyment prolileyn, - (Continued on page 130.)-
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