Political Uneasiness -The Summer Slump in Stock Exchange Quotations -Big Capital Increases – Poor Wheat Crop

«The Economist», 13 settembre 1924, pp. 421-422

Turin, September 2

July and August were troublous months in politics and economics for Italy. In politics, there is not in sight a ray of hope of a solution of the Matteotti crisis. Two decrees which suppress the liberty of the Press, giving to the local agents of the Government (prefetti) the power to prohibit future issues of obnoxious newspapers, have not quieted the unrest of public opinion, which is bent on obtaining justice against all guilty parties. The parliamentary opposition is determined not to return to the House after the autumn recess, unless conditions of absolute liberty are restored to all parties. Fascism in power, however sure of its two-thirds majority, is planning constitutional reforms; universal suffrage is, it seems, to be substituted by a sort of professional representation, where trade, industry, agriculture, liberal professions groupings will have a voice.

All these may be simply rumours, which keep the political world uneasy guessing the future. In the business world unrest also prevails. In a previous letter I gave figures illustrating the stock exchange fever, which culminated at the end of May. Recently the fever has subsided. Bachi’s general index number for State securities (taking as the basis 100 the quotations for December, 1918), which had increased continuously from 96.4 in December, 1923, to 109.5 in May, 1924, fell to 106.9 in June and 105.8 in July. Quotations for the end of August do not show a noticeable advance. As usual, fluctuations were greater for “variable dividend” securities. From 85.67 in December, 1923, these had advanced to 114.34 in May, 1924; in June they fell to 110.82, in July to 107.62. Navigation, hemp and flax, cotton, motor-cars, sugar, land and houses were foremost in the fall. Operators were obliged to liquidate speculative holdings at a great loss. The end of August account saw many forced sales on the stock exchanges. Bull positions were almost cleared out, and new engagements reduced almost to nothing. If the political uncertainty were not repressing any sustained speculative endeavour, the autumn months would probably see another frantic rise.

Banks and financial circles are interested in the rise, in view of the big increases of capital which are in contemplation. In the first half of 1924 there were constituted 845 new joint-stock companies with a capital of 510.4 million lire, and 650 old companies increased their capital by 2,389.9 million lire. Only 246 companies with a capital of 288.9 million lire were wound up; 187 reduced their capital by 259.5 million lire. In the aggregate the number of joint stock companies rose by 583 to 8,335; and their capital by 2,289.4 million lire to 26,111 million lire. The movement has not spent itself; perhaps a total of 1,000 million lire increases of capital are planned at present. A very big figure, which is an indication of a great abundance of new capital in the country. The balance-sheets of three foremost Italian banks (Banca Commerciale Italiana, Credito Italiano, and Banco di Roma) have increased their liabilities from 13,925.3 to 14,963.1 million lire between February 29 and June 30. The increase is wholly due to increased deposits.

The black spot in our economic situation is the indifferent agricultural crop prospects. The wheat yield, which was 6.1 million tons last year, is calculated for 1924 at only 4.8 million tons, a big decrease, which will cause a corresponding increase of wheat imports. In part, the low yield is due to diminished sowings – 4,550,000 hectares in 1923 against 4,743,640 in 1922. Agriculturists were discouraged last year by the low prices quoted for internal wheat at sowing time. Owing to the abundant internal crops, mills were able to buy from agriculturists at prices much below those ruling in the international markets. Today, owing to scarcity of yield, internal prices are higher: 110-120 lire per 100 kg, against 85 last year. But the international level is higher still – perhaps from 130 to 140 lire at Genoa. The prospect of imports of from 2.5 to 3 million tons at those prices is already hardening foreign exchanges.