Business & Finance: Spreading Bog?

Economists are generally agreed that if the U. S. pulls England after it into Recession, the world will be in for another bona fide depression. In Cleveland last week talkative Colonel Leonard P. Ayres once more turned his beady eyes upon the subject. Said he: “It is still uncertain whether our business collapse is going to result in a new depression in the rest of the world. Canada experienced a rather sharp decline in production from November to January. There has been a moder ate decrease in the volume of international trade. For several months unemployment has been progressively increasing in England. Stock prices have been moving downward in most foreign countries. These are not encouraging developments, but they are still inconclusive.”

“Still inconclusive” also is the verdict of British bankers. That egg-headed optimist the Right Honorable Reginald McKenna in his annual report as chairman of the Midland Bank saw “no indication that the drop in stock exchange quotations and commodity prices will lead to a comparable decline in trade.”

Chairman Colin Campbell of the Na tional Provincial Bank in his report last month declared: “It is true that recently the gain in employment has not been fully maintained, but making allowance for the seasonal factor we are justified in looking upon this contraction as a pause rather than a general set-back.”

Lord Wardington, chairman of Lloyd’s, reported last month: “I see no reasons in the fundamentals of our commercial position to apprehend any serious set-back.”

The “fundamentals” of British trade are not, however, quite so optimistic as British bankers. On the credit side are:

¶ A 9% increase in railroad freight revenues last quarter (partially the result of a 5% rate increase last October).

¶ Steel production at the highest rate in British history (due to rearmament).

¶ Rayon, brewing and several other light industries booming.

But the debit items include:

¶ British stock prices at three-year lows.

¶ Unemployment up 195,000 this January over a year ago, estimated at 1,825,607 last week compared to 1,339,600 in September.

¶ Total building construction off from $138,440,000 in the last quarter of 1936 to $131,455,000 in the same period of 1937.

¶ Automobile production off from 115,145 in the 1936 fourth quarter to 106,547 in 1937.

¶ Cost of living up 15% since last spring. C. An import balance of £52,000,000, largest since 1931.

¶ Slumps in the sales of clothing and textiles.

¶ Export quotas of the International Rubber Regulation Committee (dominated by Britain since her colonies produce over 50% of the world’s rubber) at 60% of basic allotments against 90% in late 1937.

¶ Export quotas of the International Tin Committee, also dominated by Britain, reduced last week to 55% against 110%, in 1937.

Weighing all these facts, the American Consulate General’s January report on Britain’s economic condition concluded: “British recovery, which is now over five years old, has lasted longer and reached a greater relative height than the normal trade cycle of the past. . . . The weight of evidence appears to be that the peak of British economic recovery has been reached and that 1938 will witness the continuation of the present slight recession. . . . How far the recession will go, it is infeasible to predict, but the consensus of competent English opinion considers that British industrial prospects for the second half of 1938 will be profoundly affected by what happens in the U. S. . . .” Apparently justified was Broker W. B. Burton-Baldry, who writes the world’s most literate market-letter for London’s Silverston & Co. In his letter of Dec. 31, 1936, he cracked: “Beware of the boom that is heralded in 1937; it will eventually . . . turn into a boomerang.”