OFF BALANCE
TT may be some time before Mr. Macmillan makes his first 'speech as Chancellor. But it is to be hoped that he is already thinking hard about it because it will be scrutinised throughout the business and financial world for signs of a fresh approach to Britain's economic difficulties. And there is plenty to think about. We enter 1956 with our gold reserves at their lowest point for nearly four years. The trend in recent months has been disappointing. The payment on the last day of December of just under 190 million dollars to service the American and Canadian loans brought the reserves to a little over 2,100 million dollars. But the sterling area barely managed to pay its way with the rest of the world in December and ran farther into debt with Europe. Considering the good prices and strong demand for many of the sterling area's raw materials, and the high level of international trade, this is not very heartening. We shall have to do a lot better in the first few months of this year if we are to get through the lean period in the summer when the sterling area's trade is slack and the E. is liable to run into difficulties. Meanwhile in Britain there is little evidence that the credit squeeze is having much effect outside the banking system, where the picture is beginning to change slowly. In industry there are only the smallest signs of success; there is some falling off in orders for capital goods,and new factory building, but not much, As for the whole industrial effort, the position is paradoxical. On the one hand most company chairmen report that their output is limited only by the capacity of their fac- tories; on the other the index of industrial production suggests that output has been increasing at a slower rate since the autumn. Too much should not be made of this index, however, since some of the important information on which it depends is only available after a long delay. In any case, to make this index the barometer of economic success—as the Treasury still seems to do—is simPliste and dangerous. The real criterion of success is whether the Government can call a halt to inflation.
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