Since the foregoing was written there has been no visible improvement in American industry. The Times index of Business Activity, which made a new low at 783 early in January is still in the vicinity of 80. Steel Production is now steady at just around 30. Building Contracts continue to fall off.
But the normal course is for recovery in the Stock and commodity markets to foreshadow the actual recovery of industry and trade, In this direction there is some encouragement to be found. The Dow-Jones Commodity index after recovering to 5492 and slipping to 52.53 has now regained the loss. Similarly the Industrial Average reached a new high at 134.35, then slipped to 118,49 and is now about 130. Of more significance perhaps is the action-of Rails which made a new low at 27.08 but recovered sharply to 30.52 in three weeks, Behind these movements is probably the beginning of a subtle change in the psychology of the markets. Although antagonism between the government and business continues, Roosevelt has recognized the need to reverse the deflationary trend of the last half year and has said that prices are too low and ought to go up. The Housing Bill has been signed and a decision on Railway freight. rates is expected at any moment. American armaments are to be greatly expanded. The Farm Bill has been passed, promising control of production and marketing of the basic crops of the country, A Cautious Optimism Devaluation and inflation are expressly disavowed by Roosevelt and though the latter may not be avoided in actual fact, the foundations on which he is trying to rebuild are certainly sounder.
clining and excessive inventories afe Building costs are reported dgbeing worked off though it may be some weeks before an all round return to normal is seen; in the meantime depleted inventories of raw materials are being replenished by modest spot buying. The heavy speculative positions of last Spring are probably all liquidated by now, all markets are technically are no overseas countries to-day relying on an abundant and steady stream of new borrowings to balance their accounts, On the contrary, all the primary producers are now solvent, and many of them are still piling up substantial "reserves in London." (Economist, " January 1, 1938).
2. The rising trend of commodity stocks is likely to be soon checked by the operation of various planned controls.
8. The drastic curtailment of production in the United States has greatly reduced the stock of manufactured and semi-manufactured goods. Replenishment must follow, unless one postulates a complete breakdown, of which there is no visible' evidence.
4. For the same reason, the tremendous arrears of capital goods in the United States must sooner or later be made up. Cabled reports state that the Steel Corporation contemplate spending $80 million this year in plant modernization.
5. Universal easy money, (Shang-stronger, In Great Britain, Business Activity and Foreign Trade, though lower, are well maintained but unemployment has been rising rapidly since November, Both the Stock and Commodity rharkets have made new lows recently but are beginning to recover. The relaxation of the Treasury ban on foreign lending should help general recovery and the resignation of Mr, Eden may promote a better understanding between nations.
On the whole, therefore, the outlook seems more hopeful than at any recent time; more than that cannot be said with confidence. The very severity of the decline and stagnation we have experienced ensures increased activity in the Spring when a pick-up would, in any case, be seasonable. The markets may drift uncertainly for some time but a definite trend must develop in the end and close watching may reveal early signs of the coming change. hai bankers, please note!)
There is no pretension to any exhaustiveness about these considerations but they do suggest that if we must have a depression it is not likely to be of long duration. There is also, encouragement in the news that the British Government has decided to sanction a resumption of
Text read from the printed page and cleaned; old type leaves the occasional error.