THE EVOLUTION OF THE ECONOMIC CONJUNCTURE
It is still too soon to come to a conclusion as to whether the recession that began in 1957 is giving way to a new upsurge or whether it is to be prolonged for a further period of relative stagnation. At all events, in the United States the gradual and uncertain recovery that began in May 1958 is showing signs of speeding
In March and April industrial production increased two points over the previous month (instead of only one point, as was the case until February 1959). Furthermore, the steel industry has been for several weeks already operating at more than 90% of capacity. It is true that it is the revival in this field which is contributing to increase the general index of industrial production, and that furthermore this revival is in part artificially stimulated by the prospect of a possible prolonged strike of the steel workers in June and/or of a new increase in steel prices. But the revival in steel is also due to the spurt in the auto industry (more than 20% over last year) and in other durable goods.
Besides this, the building boom, that kept up during the whole period of the recession, is continuing without showing any signs of getting winded soon.
The dark patches in the picture of an accelerating recovery are the following:
Unemployment, although diminishing, stays at more than four million officially, more than five million according to trade-union leaders. It is thus confirmed that the matter is one of "technological" unemployment resulting from progress in automation, an increase in productivity being at the origin of the increase in production. It is foreseen that, with numerous advances in productivity and the growing number of young people entering the labor market, reabsorption of the unemployed - 6% of the whole labor force - will be difficult.
The revival in the sectors of machine-tools, industrial construction, and durable goods, although begun, remains still very slow.
Exports continue to stagnate, in the face of increased imports, causing a serious hæmorrhage of the country's gold reserves.
What is more, stock-market speculation goes on worse than ever, the public more and more playing industrial shares against government bonds.
From this brief description of economic developments in the United States there may be derived the following conclusions, which might serve as lines indicative of their later evolution.
In order that the revival may speed up to the rhythm of a new boom, there must at some moment be introduced the factor of new and important private and public investments. This prospect for the moment does not take form.
Despite a relative stability of prices since the revival, the danger of a new inflation haunts the American economy and worries those responsible for it
What is happening with exports and the stock market is a sure indication of a flight from the dollar, whose purchasing power is diminishing. The Treasury must now constantly fight against the danger of threatening trade and budgetary deficits which would lessen American industry's competitive abilities in the present climate of revived international competition.
The Treasury is faced with the problem of refinancing $ 260,000 million of debt during the next five years. Early this year the Treasury offered to pay interest rates of 34% for a one-year extension and 4% for a three-year extension of its maturing bonds. But the holders of 22% of the total debt demanded cash, probably considering that speculating on the stock market is safe, but to save in bonds is gambling. Almost a third of the Treasury debt is in savings bonds which pay 34% interest and can be converted to cash at any time.
As for the economy of Western Europe, there also there are signs of revival, slow and uncertain for the moment, most visible once more in the case of Western
Germany. In any case the new rate of expansion still remains perceptibly lower than that of the 1954-1957 boom, especially in comparison with that of the current expansion of the economy of the US S R and the other
European workers' states.
FOURTH INTERNATIONAL
The advances scored by all these states in 1958 are in the neighborhood of between eight and ten percent compared to the preceding year, and seem to be further speeding up during the present year.