into balance-of-payments trouble if our domestic investment and consumption ex-
ceed our physical resources, as they have done in the first half of this year. That is the first correction Mr. Butler is now try- ing to make. But can we secure a surplus on our international account if our em- ployment remains over-full—that is, with only 211,000 unemployed (1 per cent. of insured employees) and 460,000 unfilled vacancies? Does that entail too high a wage bill, too large an import bill and too small an export income? It would seem so. But, alas, Mr. Butler cannot cut imports by order; he cannot force foreigners to buy British goods. Somehow or other he has got to find an employment level full enough to satisfy labour and not too full to upset the trade balance. Clearly he can- not solve this problem without the co-
THERE was great relief in Throgmorton Street that the Chancellor had proposed no new measures of restraint, but business failed to respond and the number of bar- gains marked fell to half its recent high level. I suspect my colleague is right in being sceptical of the recent rise. I see no signs of the insurance companies being yet prepared to buy more equities. The main support is coming from the smaller investors and the pension funds, but August is pro- verbially a quiet month and in the prevail- ing uncertainty share prices will probably drift lower until the next Treasury move is known. When in doubt the investor with idle funds might well buy VICTORY 4 per cent. at 94+ and secure the running yield of 4.2 per cent. or the 4+ per cent. redemp- tion yield for the twelve-year average life. Last year over 3 per cent. of this stock was drawn. With drawings at par the stock can- not fall much below its present level. The fact that it is accepted at par for death duties is another point in its favour, even if you will not enjoy it. Company news has been brief. INTERNATIONAL TEA reported a slight fall in profits for the year to April 30, due to the sharp fall in tea prices which began in January, but the final dividend is being increased on the capital doubled by the 100 per cent. scrip bonus and at 14s. the 5s. shares yield 5 per cent. on the basis of the current 13f per cent. Will the dividend this year be raised to 15 per cent.? It is not impossible, but competition in the grocery trade is keen and the market in store shares is not in the mood to be too optimistic. If the price comes back, it would be well to remember that International Tea has £4 million of freehold properties and the assets value per share is about l ls. 6d.
operation of labour. It is possible to have full employment and an international surplus, but only if output rises faster than the wage cost per unit of output. Up to the end of 1954, according to the new Treasury bulletin, it has done so in manufacturing and in transport, electricity, gas and water, but not in building and contracting, mining and quarrying, and the distribution trades. Wages have since gone sharply ahead, and unless productivity rises this will hit at our export trade and worsen our balance of payments just when an extra burden has been imposed upon us by larger imports of coal and a decline in American aid. If labour does not co-operate, there will be a balance-of-payments crisis this autumn (pace Mr. Harrod), and if there is another dock strike there will be a national emer- gency. It is a pity that Mr. Butler cannot attend the coming Trades Union and Labour Party conferences and argue these vital economic points on their platforms. Plain speaking is called for.
than we have. Trade between the manufac- turing countries and the primary producers, which is our special province, has not been rising so fast. The British motor trade is strongly entrenched not only in the sterling area but in the special 'sports' and 'baby' car trade of the dollar area. It is the curb on hire-purchase in Australia which is the gravest threat to our motor exports. How Mr, Butler's new restraint upon hire- purchase here will affect the domestic trade remains to be seen. As hire-purchase con- tracts for new motor cars in June were 70 per cent. up on June, 1954, some decline is inevitable. However, the market in BRITISH MOTOR CORPORATION 5s. shares Cum the new 12+ per cent. scrip bonus has not been unduly disturbed. The price has been quietly steady at 13s. 3d. This is equivalent to 1 1 s. 9d. ex rights. The market is going for the maintenance of the 12+ per cent. divi- dend on the increased capital. On the old capital, earnings amounted to 48 per cent. or 44 per cent. after the cash issue last December, or 39 per cent. after the present 121 per cent. bonus issue. In view of the expansion of manufacturing output current earnings should be rising strongly enough to maintain the 12f per cent. dividend. This would put the shares ex rights on a 5+ per cent. yield basis, which is not unattractive for the leader of the British motor industry. On any further fall in the market BMC would come within a buying range.
Government control of the number of pages of Britain's newspapers is to end next March, and it is hoped that a voluntary scheme for distribution of the available newsprint supplies will take its place. This is not the time to buy newspaper shares. The lid. papers would already have been put up to 2d to meet increased costs if agreement among the rivals had been pos- sible. It would be logical to switch from newspaper to newsprint shares—BOWATER and A. E. REED-but the current dividend yields of around 31 per cent. are not yet attractive enough to tempt the more cautious investors. The newsprint market should be watched for a fall.
COMPANY NOTES
By CUSTOS
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