Reporting Progress
"Tine gold and dollars figures for February are A. outstanding. No less than $135 million was added to the central reserves and at the same time Britain and the sterling area earned a surplus with the EPU of $126 million. When the excellent figures for January were announced, commenta- tors found that they had to run back through their records for nearly four years to match them. Now, however, financial writers are having to look up what happened in 1950 to make their comparison. The picture is indeed astonishing. The reserves are now £320 million higher than they were at their nadir last September. They have risen by more than £200 million since the beginning of Dedem- ber and in February alone the sterling area's surplus (not all of which will be settled in gold or dollars) was over £90 million. Clearly the pattern of payments is swinging back into our favour.
To add £200 million to the reserves in three months when Britain's own current surplus can hardly be more than £400 million a year suggests that the whole of the speculative movement against sterling is now being unwound. There seems to be little reason why this excellent progress should not continue for some months, so that by the end of June the reserves may be back to $3,000 million. If this can be achieved the chances of another sterling crisis this autumn will be considerably diminished. When these results were announced sterling became even more in demand from overseas and particularly from Europe. The Stock Exchange, too, reacted favourably and not unnaturally the possibility of a cut in Bank rate shortly was dis- cussed. Until now only a minority have expected such a cut before the Budget. Now, however, it seems possible that some reduction, even if it is only a small one, may be made in the next week or two. This could certainly be done without damage at the present moment, though, equally, there are strong arguments for being cautious.
Apart from the cost to the Budget and the balance of payments of the high Bank rate, there is little evidence yet that it is doing serious damage to British industry. The most ridiculous tales are being put about by people remote from the world of business about decisions being taken every day to cut down or cancel plans for expansion and modernisation of plant. This is stuff and nonsense. Capital spending this year is running at the same level as it was last year and the only companies not now carrying out large-scale plans for modernisation are those who have already com- pleted them.
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