Italy

«The Economist», 19 ottobre 1935, pp. 755-756

PRODUCTION AND EMPLOYMENT. – Statistics concerning production, employment, prices, the cost of living and consumption would be more interesting if it were possible to have up-to-date figures. A lag of a few months, however, is now usual. Indices of production (yearly or monthly averages; average for 1929=100) are as follows:

The indices for 1935 are generally and markedly better than those for past years. The exception of the textile industry is due to the influence of the crisis in the silk (spinning) industry, which is very depressed owing to the high prices of cocoons and the suspension of imports of cheap foreign cocoons. Accordingly, the silk production index fell in July as low as 9.5, against 50.6 and 103 in the same month of 1934 and 1930 respectively.

Rayon production, on the other hand, is buoyant. The index was 261.5 in July, 1935, against 189.7 in July, 1934, and 121 in 1930. In the iron and steel group activity is general; and copper and quicksilver are the only exceptions (52.3 and 50.5, respectively, for July, 1935). A production record was achieved by aluminium, the index of which rose in July to 525.5. The two most representative indices are, however, those for electricity and gas, which supply energy to all industries; and these both show a high degree of activity. The drop in July, compared with June, is almost wholly attributable to the textile group.

It is not surprising, in face of the production figures, that the number of unemployed in August was 238,235 less than in August, 1934. The only mystery in the unemployment statistics is that there are still 628,335 unemployed. A relatively small number of these can be considered as true unemployed, perhaps not many more than the 104,043 men who at the end of May were in receipt of unemployment benefit. The most general complaint among employers is that men, however urgently required, are not forthcoming. Employed men are also being more fully utilised. From June to July the percentage of men employed for less than 40 hours and from 40 to 45 hours weekly decreased, respectively, from 34.1 to 27.1 and from 44.2 to 40.2.

PRICES RISING. – The working classes are being affected at once by increased employment and by rising prices. Wholesale prices are rising fast. The Milan Council of Economics’ general wholesale price index is 339.5 (1913=100) for the fourth week in September, against the low point of 272.9 reached in July, 1934. Retail prices are rising more slowly. The national cost-of-living index was 71.6 in July, 1935, against 68.76 in July, 1934. Industrial wages in June, 1935, stood at 83, against 82.50 in June, 1934 (average for 1930=100). In agriculture the wage index was in changed. As since 1930 the cost-of-living index has fallen by 21 per cent., it may be concluded that industrial employees are slightly better off.

An interesting sidelight on the condition of the working classes is given by the systematic inquiry conducted by the Milan Retailers’ Federation on the sales of 58 retail shops. The sales index (January, 1934=100) was as follows:

The statistics of commodities taxed in the 92 most important Italian cities are perhaps more representative. There is a decrease between the first seven months of 1934 and of 1935 in the consumption of wine (4,871,742 hectolitres, against 5,201,845), but no appreciable change in consumption of fresh meat. Consumption of salted meat increased from 9,410 to 10,185 tons, lard from 5,973 to 6,480 tons, and salted fish from 10,664 to 11,662 tons. Cheese consumption increased also from 33,584 to 36,158 tons.

Subscriptions to the new 5 per cent. Consols, issued at 95, are as yet not open to the general public, but only to public institutions and banks. The issue is not really a new one, and nobody is being asked to pay 95 lire for a security which can be easily bought at a lower price. The issue is another name given to an offer of a gigantic conversion of the existing 61,000 million lire 3 1/2 per cent, redeemable stock into a 5 per cent, consolidated stock. By paying 15 lire cash and surrendering the 3 1/2 per cent, redeemable the bearer is entitled to receive a new 5 per cent. Consol guaranteed for 20 years against future conversions. As the offer is attractive (additional interest of 1 1/2 per cent., against a capital payment of 15 lire) and as Italian savers do not attach much importance to the redemption value of the present 3 1/2 per cent, stock, it is probable that the conversion will be a success. If all holders accept, the Treasury will receive 9,000 million lire, a sum which will go towards defraying extraordinary war expenditure. From the market point of view, the conversion will require some aid, as nobody thinks that 9,000 million lire are to-day available or can become available in a few months. Nor does the Treasury need the whole sum at once. The banks and the Treasury will undoubtedly strive to ease payments so that subscribers are not forced to have recourse to Bank of Italy advances. In fact, subscriptions ought to be used to reduce the amount of notes issued, which in recent years has been increasing at a disquieting rate. Between June 30th and September 20th, the Bank of Italy’s notes were increased from 13,028,600 million to 14,917,200 million lire. As soon as payments for conversion are made to the Bank, the amount of notes issued ought to decrease. The ideal circulation, i.e. that circulation which could be regarded as in equilibrium with the foreign exchange rate, can be said to be roughly between 11,000 and 13,000 million lire. The regulation of the note issue is strictly dependent on the success of the conversion.

Turin, October 9.