A somewhat less satisfactory feature of the trend of average import and export prices is the tendency of domestic exports to become dearer in relation to imports. Thus, between the fourth quarters of 1929 and 1937 the average price of domestic exports rose by about 13 per cent. relatively to that of imports; moreover, there was a further increase of 8 per cent, between the last quarters of 1937 and 1938, The increase in export relative ly to import prices means that we obtain more imports per unit of exports or that we obtain them more cheaply. But this tendency also explains why exports never fully recovered from the depression, although the volume of imports in 1937 was appreciably higher than in 1929, and, partly, why we have lost ground in overseas markets to other exporting countries. A reduction in commission costs seems essential, therefore, if the export trade is to flourish again, though a marked rise in import prices would also help to correct the price disparity and raise the volume of exports, The immediate prospect for an expansion in exports is not very favourable, despite the improvement in the last quarter; at home activity in the building industry is still downwards, and Sir John Simon's statement on the question of compensation for war damage is unlikely to reverse the trend by rendering property more attractive as an outlet for savings. Among other capital goods industries, the construction of merchant shipping tonnage also remains on the downgrade. On the other hand activity in the electrical equipment industry is likely to be maintained at a high level owing to the heavy expenditure on new equipment for the electricity supply industry. It is difficult to estimate with any degree of precision how far the decline in new capital expenditure for commercial purposes will be offset by increased armament expenditure. But defence expenditure is certain to be substantially increased, for there are indications that the Government is now more alive to the magnitude of its task. On the whole, however, the increase will probably not be sufficient fully to compensate for the fall in private activity in the near future.
The trend of general business activity, therefore, probably remains slightly downwards; but, judging by the latest evidence, the extent of the decline in coming months is likely to be comparatively moderate.
Text read from the printed page and cleaned; old type leaves the occasional error.