Stock Market Revival – Wholesale Prices – Hours of Labour -Loan Result – Budget Surplus

«The Economist», 5 febbraio 1927, p. 276

Turin, January 29

A sharp recovery in the stock market has taken place since my last letter. Its extent can best be gauged by the new index number of 35 representative securities published by the Milan Chamber of Commerce (basis, December, 1925=100):

The recovery was the most marked in the textile group. The rise has continued during the

present week, and will leave trace on the index number when published. The turnover figure is also increasing in consequence of the lively interest taken by the speculative public. Rumours were current of a plan for the stabilisation of the lira at about 125.66 lire to £ sterling, but these were silenced by a trenchant communique in the Popolo d’ltalia, which characterised them as “imbecilli”. A more concrete justification for the rise in the textile group was the agreement between the Courtauld group, the Vereinigte Glanzstoff, and the Snia-Viscosa for the regulation of the artificial silk market. Prices of the Snia-Viscosa shares, which had sunk to 120.67 lire at December 31, 1926, jumped up today to the 220 level. The rise of the Snia was the spark from which all the market took suddenly fire.

The problem of the lira remains the crux of the industrial and general economic situation. Deputation after deputation is said to be waiting on the Premier and the Finance Minister, but the uniform reply is that the Government remains bent on its revaluation policy, which is beginning to have a marked effect on wholesale prices. The index number of the Milan Chamber of Commerce (basis 1913=100) has moved as follows:

The effect of the decrease was felt most by the textile industry, where the crisis is being met by a general reduction in working days to five and four per week. An interesting inquiry conducted by the Cotton Association elicited the fact that the percentage of losses on home sales of yarns was 0.15 per cent, in 1924, 0.17 in 1925, and 0.58 in 1926; on foreign market sales respectively 0.62, 0.74, and 0.83. The losses on home sales of cloth were 0.60 per cent, in 1924, 0.49 in 1925, and 0.70 in 1926; on foreign market sales respectively 0.87, 0.69, 0.99 per cent. The percentage of losses never reached 1 per cent., and can be met by common foresight on the part of the manufacturers. Their real concern is the unforeseen variations of prices.

The increase, however slight, in unemployment and the reduction in the number of hours and days worked in some industries had rendered obsolete the decree of June 30, 1926, by which manufacturers, traders, and agriculturists had been authorised to increase from eight to nine the hours of daily work of their employees. The decree was a part of the programme for the increase of production and revaluation of the lira, and much fuss was made about it in international labour circles. But it was never put into practice, and a decree of January, 11, 1927, forbids employers to take advantage of it unless duly recognised associations of employers and employed are in agreement as to the prolongation of the hours of work, and the regulations concerning it; and unless the agreement has been approved by the Inspector of Labour or the Minister for National Economy. The supplementary hours of work must be paid for at the special rate provided for by the decree of March 15, 1923.

At the date of writing the subscription lists of the new 5 per cent, consols are not yet closed; but presumably the yield will be about 3 billion lire. The Treasury received, on account of the loan, in November 276.5 million lire, and in December 672.0 million lire, a total of 948.5 million lire. Various instalments are due in the course of 1927. The current account of the Treasury at the Bank of Italy, which was reduced from 2.669 millions at the end of February, 1926, to 1,321.0 in July, 1,220.0 in August, and, owing to reimbursements of Treasury bills, was running dangerously low at 632.1 at the end of September, and was converted into an overdraft of 129.7 at the end of October, and of 697.7 millions at the end of November, is now, thanks to the yield of the loan and good tax revenue, in credit. At December 31, 1926, there was a balance of 95.6 million lire. If public expenditure is rigidly controlled, there is no risk that the critical situation of October and November will again occur, after the consolidation of the Treasury bills. In the six months from July to December effective revenue was 9,630.3 million lire, against effective expenditure of 9,005.7 million lire, with a cash surplus of 624.6 million lire.