Italy. Rise in security prices. Signs of recovery. Rice and wheat prospects

«The Economist», 18 novembre 1933, pp. 965-966

Turin, November 10

The most interesting movement on the Italian Bourses in recent months has been that of gilt-edged securities. From average prices of 78.33 and 86 respectively in the first half of 1933, quotations of 3.50 and 5 per cent. Consols rose to 79.65 and 89.10 at the end of August, to 82.50 and 90 at the end of September, and to 90.65 and 94.50 on October 14. This unusual movement gave rise to rumours of a new issue of Treasury bonds or Consols, said to be necessitated by the big deficit of 3,938.0 million lire for the fiscal year 1932-33, followed by a deficit of 717.7 million lire in the first two months (July-August) of the present year, against a corresponding deficit of 669.4 millions in the corresponding months of 1932-33. An official communiqué issued by the Treasury declared at once that no such issue was contemplated. The public Exchequer notwithstanding these deficits, which are largely book-keeping entries, is very well provided, cash amounting to no less than 2,032.6 million lire. No bonds are due until late in 1934. The rise is gilt-edged is a genuine reflection of superabundant savings, and of the predilection of savers for Government securities.

Notwithstanding many attractive issues of fixed interest bonds by the State Railways, by the I.M.I., I.R.I. and other public bodies which have absorbed new savings in recent years, postal saving banks’ deposits have increased by about 30 per cent. from December, 1931, to July, 1933, ordinary saving banks’ deposits by over 4 per cent. between the same dates, and public credit institutes’ and ordinary bank deposits by about 33.1/3 per cent. over the same period. The only decreases took place in the People’s Banks and Regional Banks groups, and they were of a quite negligible order. Even in these groups, however, a turn of the tide is remarkable in the first half of 1933. Without doubt, when a public issue is once decided on by the Treasury it will be a success. Competition of private issues by Joint Stock Companies is absent. The number of registered companies increased from 17,384 at the end of 1930 to 18,518 at the end of 1932, and to 19,080 on June 30, 1933; but the capital decreased in the meantime from 52,280.8 to 49,601.7 and 48,668.6 million lire respectively. The decrease is merely the legal liquidation of past losses; and when capital figures again increase, the situation will be by far more liquid than in the boom years.

That industrial activity is better is shown by the following figures:

Production of thermo-electrical energy also increased between the first seven months of 1932 and the same period of 1933. The expansion of trade is also illustrated by the following figures:

These are real indices of growing industrial activity, taking place without appeal to the money market, simply by the better utilisation of already invested capital.

Agricultures is less certainly recovering. The rice situation in depressed. The area decreased from 135,469 hectares in 1932 to 126,792 in 1933; and production decreased from 6,566,420 to 6,011,180 tons; but prices of raw rice (original first) are low at 420 lire per ton. The Rice Board is making great efforts to encourage exports, with taxation of home-consumed rice and premiums on exported rice. A further reduction of the rice area now seems imperative. But is compulsory reduction to be the same for all, or vary according to the suitability of the land? This last solution is being impressed – not compulsorily, but by authoritative advice – on wheat growers by the Department of Agriculture and by the Confederations of Agricultural Employers and Employees. As the wheat crop appears to have been good and as Italy has signed, with various reservations, the London Wheat Convention, efforts are made to settle the wheat problem by the adoption of better methods of cultivation, in accordance with the Convention’s provision that home production shall not exceed home consumption. Hence the official advices to limit wheat-growing to well-situated lands. What owners of indifferent soils are to do, when, at present prices, wheat is as yet the best proposition in the market, is not yet clear. Substitutes for indifferent soil are not easily obtainable.