Italy. Stock exchange. Revenue and expenditure. Railway traffic. Foreign trade. Unemployment. Prices

«The Economist», 14 marzo 1931, p. 563

Turin, March 6.

If Stock Exchange accurately forecast impending economic developments, Italy is one of the countries in which there is hope that the bottom of the depression has been reached. As usual, fixed interest securities are recovering first: Five per Cent. Consols, which in October, 1929, were as low as 78.09, and in January, 1931, were at 80.38, are to-day 82.50 and are in lively demand. The index number of 14 mortgage and industrial debentures, compiled by the Milan Economic Council (December, 1925, = 100), rose continuously from 99.30 on December 21, 1929 to 102.10 on January 3, 1931; then, more rapidly, to 103.96 on February 28, 1931. Middle-class and country savers, unwilling to invest in industrial shares, are buying largely state and land credit securities. Postal Saving Certificates, when pay 5 per cent. after the first complete year, slowly rising to 6 per cent. after five years, are enjoying great favour. Net issues amounted to 338.5 million lire in 1926, 871.4 millions in 1929, and 1,178.5 millions in 1930. Variable dividend shares are slowly following suit, but the force of the slump seems to have been spent at the beginning of the year, when (on January 3^rd) the general Milan index touched 66.42, as against 81.21 on December 21, 1929 (December, 1925, = 100). On February 28th the index was up to 69.56. The upward movement, though retarded by bull liquidations, was recently aided by the discomfiture of some bear operators. One well known Milanese business man, for example, was caught with a load of about 417,500 oversold shares of the most miscellaneous description, for which he was obliged to seek cover with a big loss, provisionally said to amount to £ 100,000 at the February settlement.

In contrast to stock exchange anticipations, economic indices of past events give a mixed impression. The first seven months of the financial year show a Budget deficit of 1,011.2 million lire; but as our system of accounting, which shows figures of income and expenditure due to be received or made on the current year appropriations, is too scientific for British minds, I prefer to quote the effective receipts into and payments out of the Exchequer during the same seven months’ period, as from July 1, 1930. These show 10,329.4 million lire receipts and 10,506.6 millions payments; with a cash deficit of 177.2 million lire.

If the Exchequer situation may be considered fairly strong, other indices are less encouraging. Passengers carried on State railways decreased from 8,039,355 in January, 1930, to 6,684,832 in January, 1931, and passenger revenue from 113 to 96 million lire. Goods carried in January, 1931, amounted to 3,493,121 tons, against 4,401,171 in January, 1930, and goods traffic only yielded 171, against 220 million lire. Energetic efforts are being made to counteract this decrease by such measures as reduction of personnel expenditure from 184 to 166 million lire, and curtailment of the train service.

Provisional figures of foreign trade for January give imports at 1,028.6 million lire, as against 1,505.5 in January, 1930, and exports at 695.6, against 974.9 millions. The excess of imports over exports has decreased from 773.1 millions in January, 1929, to 530.6 in January, 1930, and to 333 millions in January, 1931; but clearly industry is buying from hand to mouth and drawing on stocks. When trade revives a scramble for raw materials is bound to take place. The number of unemployed reached 722,612 in January, 1931, against the previous maximum of 612,169 for 1930 (December) and 489,347 for 1929 (February). The consumption of electrical energy was 9,930.5 million k.w.h. in 1930, against 9,745.2 k.w.h. in 1929. Only in August, November and December was consumption less in 1930 than in 1929. Wholesale prices are lower than in 1913. The general index (1913 = 100), which was 526.67 in 1927, was in the last week of February as low as 357.14. As at the same date the gold exchange was 368.48, gold prices are 96.9 per cent. of the 1913 basis. Industrial goods have suffered most; their index is 349.35, while food commodities remain at 376.32. The cost of living (June, 1, 1927 = 100) had remained at about 93 during the years 1927, 1928 and 1929, and decreased in 1930 to an average of 90.72; but after the campaign which began last November the index fell in December, 1930, to 86.56 and in January, 1931, to 84.09; the food index fell in January to 82.59. There is as yet a big gulf between wholesale prices, which have fallen since the middle of 1927 by about 32 per cent., and the cost of living, which is down by only 16 per cent. There, perhaps, lies the greatest hindrance to a new equilibrium between the prices received by industrial and agricultural producers and their costs of production.