Some of the Chief Factors on which Hopes of Better Business can be Reasonably Based
The decided decrease in the exports and the imports for Canada during the month of February fully confirms the situation as tcas outlined in the April issue by Mr. Appleton. The significance of the import decline and the resumption of municipal activity in Western Canada in encouragement of agricultural settlement and the increased mixed farming output as evidenced by the establishment of abattoirs and shipping plants, are the marked features of the Business Outlook this month. Mr. Appleton has also touched upon the railway situation and the budget, and upon construction work in cities. As Associate Editor of The Financial Post he is in a position to know the true inwardness of the ,business situation, which fact will be appreciated by the readers of “MacLean’s Magazine."
A MONTH ago reference under this head was made to the outlook for the year as not being very bright. February, we stated then, was usually a dull month, and February of the present year was exceptionally so. Since writing of that month the trade and other statistics have fully verified, more fully than anticipated, the opinions then expressed. Take as an instance the foreign trade of the Dominion. Exports, despite the widening of the market for our produce in the United States, fell below those of February a year ago. Much was expected of the lower tariff put into effect by the Wilson administration and there is ample justification for entertaining great hopes in that respect. We are referring, of course, to the effect of trade with Canada and not to the effect of the tariff on United States trade generally. It was reported from Ottawa that the value of the exports to all countries during February aggregated $20,553,000 as compared with $25,000,000 a year ago. On the other hand imports dropped to $38,550,000 as compared with $53,271,000 a year ago. Import decline is more significant than that of exports because the latter is due to the fact that very little of the cereal produce of the Dominion was shipped during the early months of the present year as compared with the corresponding period of a year ago. It \/ill not tax the memory of the business nen of the Dominion to go back to the crop year of 1912. The harvest season was impressed on their minds by the unsatisfactory weather and some of the crop stood out in the fields until the following spring.
Much of that which actually stood in the shock all winter came out in the spring better than that which was threshed after the winter had fully set in. However, the proportion of the crop gathered late, and it was a considerable proportion, went out of the country during the early months of the year, and, of course, swelled the export figures.
We have not so satisfactory an explanation for the decline in imports. The latter represent capital importation, a decline of which at the present juncture is not a good sign in so far as our business outlook is concerned. Capital in large quantities is very needful inas-
much as so much of the plant put down during the past few years is not as yet in self-sustaining forms. Our railways, with the exception of the Canadian Pacific, have embarked on plans that are not yet complete to the extent of being able to carry themselves. They need much more capital. They are in the position of the builder of a house on a site bought and paid for, with foundations down, but without enough money to complete the structure. Until completed the capital invested in it will lie idle and deteriorate. Our railways, with the exception made, are in a similar position. Some of our industrial enterprises are also handicapped similarly for want of capital. Business, nationally speaking, will not regain activity until some of the more important needs alluded to are fully met, or the financial markets are in such a condition as to leave no doubt as to the procuring of needed capital.
Canada’s Capital Requirements Canada needs capital. If imports represent it and economists tell us that they do, then the decline in imports is far more serious than the decline in exports. We have for the latter a very satisfactory explanation, as already given. It will be noticed, however, that Canada during the first months of the year has succeeded in procuring considerable money in the world’s market and that recent loans, having regard to the dark clouds that still overhang the markets, have been fairly well received. These clouds are a factor. While Canada has her own troubles and her political dissensions, they are not so alarming, nor fraught with possibilities so dire, as are those of so many countries into which British money has flowed so freely. Tension and anxiety will lead, in our judgment, to a better realization of the advantages which peace and orderliness in Canada give to investors. As yet, however, the purse-strings have not been slackened materially in our favor. In this respect, however, there will be an improvement just as soon as the investors of Europe feel quite confident that the nation, through its Parliament, stands heartily at the back of the national enterprises entered upon. At the time or writing the budget speech has
! not been delivered, but we believ. that it will meet with the approva of the business interests of the Dominior In any case business will be in a quiescen state until so important an event is ou. of the way.
After the Budget
While we regard the budget speech, a this particular juncture in Canada’s coir mercial history, as being an event of mor than ordinary moment in that it will hel to re-establish confidence, there are nc lacking other signs which raise hopes o greater business activity. Sir Thoma Shaughnessy has made some statement with regard to the immigration movemen that are of exceptional importance. H says that accommodation on their pas senger fleet is fairly well booked up, whic in view of prevailing depression is ex tremely hopeful. We have also noticed tha in view of the heavy demands for agricui tural laborers there has been a cessatio of the lurid “bathos” respecting the sul ferings of the unemployed. When ou real productive energy is yearning fo help the unemployed of the cities will ge but scant sympathy. Present condition of the labor market will also give mane facturers a chance to make wage rs adjustments that must follow the rapi ascent which has taken place in wag scales during the past few years. Sever though our depression has been ther does not appear to be an abnorm, amount of unemployment. There ha been some scattering of our labor fore« through lack of employment. Man workmen and workwomen of foreign e: traction have sought prolonged holidaj in their homelands, and will return 1 Canada as soon as trade revives. Th movement has not as yet begun apprec ably. Our immigration will therefoi have to be taken care of by agricultur where labor and enterprise is so muc needed.
Some Hopeful Signs
Of the hopeful signs ahead, intere shown in immigration by Western citii is one of the most striking. Those citii which have but recently attained to tí degree of citizenhood are the most aj gressive in this respect. Active work hi already commenced. A convention hi been called to meet at North Battlefor and it will be attended by representative of cities of the West. It is not propos« to encourage settlers to locate in tl cities, but to locate on the land adjoinii them. From this we may gather that 01 western boards of trade fully real! that city growth depends upoA develo ment of tributary territory. They a also, that is the boards of trade, takii an active and real interest in the develo ment of mixed farming. The moveme in that direction is also bearing fru Quite recently a gathering took place Saskatoon, which was attended by repr sentatives of various organizations inte ested in agriculture, and it was decidi that the building of cold storage plan at central points, and abattoirs, was present necessity. Last year’s low gra prices and the high cost of labor whi
eef and pork ruled high taught the irmers a lesson that they have learned uickly. The provision world of Eastern añada was startled a few days ago by íe announcement that Alberta was shiping a car-load of eggs to Toronto, and íe of pork to Montreal. For some years íe movement has been in the other disction. These circumstances give every ;ason to hope that very soon the busiess demands of the West will improve : at least be very much heavier than they ave now been for a twelve-month, [ixed farming will prove to be so much iore profitable to the farmers than rain-growing when prices range as low 3 at present.
“^Factors! Pointing to Recovery When wè speak here of recovery we lean the return to the very abnormal :tivity of the years which have just assed into history. It is to be hoped íat it will not come back. Such expanon, at such speed, was not healthy. Full jeed may be desirable, but not if it :rains the commercial and financial malinery of the country, or causes abnorlal growth, which afterwards have to s normalized by credit restriction. City rowth has been abnormal, for instance, nd agriculture lagged behind. The latir now has to be prodded along. Until is brought into line an active advance ill be impossible. Our cities were lecked by the closing of the money bags nd then bankers, economists and exerts agreed that more digging must be nne and more digging is being done, his is the most hopeful of the discernible gns of better business.
A second factor is the growing plenilde of money. It is not going to be vailable to the speculator. For the proucer, however, there is enough to oil íoroughly the energies of the Canadian sople. Our February bank statement lowed that current loans were very luch less than they were a year ago and ill loans elsewhere than in Canada had ícreased by approximately $45,000,000. urrent loans generally show some exansion during February, but this year ley were stationary. Savings deposits t the end of February are $10,000,000 reater than they were a year ago. Bank îserves are therefore very high. Let it e said here that at the close of the year 914, the banks will not have so good a latement to present to their shareholders B they had at the close of 1913. To acjmmodate commerce and business last ear they had to lend sometimes against leir better judgment. Under such ciriimstances, although taking some risk, ley could not very well help making loney. This year, however, they are not nding so good a demand for money, and, loreover, they are cautious. They have eed to be. Directors prefer lower rofits and greater security. But the nnds are available for all the needs, the lal needs of normal business for Canada, ■here is no need for anxiety on that tore. Rates will be about the same as 1 previous years. Mortgage money which ose at the close of 1913 is now availble at rates general at the beginning of ist year.
The Railway Factor Business men, generally, cannot afford to ignore the railway factor in gauging the trend of trade. During the past few years there has been an enormous amount of money invested in railways and it has given employment to very large numbers of workmen all over the Dominion, but particularly in the West. During the ensuing summer there will not be so many workmen employed in construction, but there will be a very large number required to carry out undertakings already entered upon. All the larger railway systems have arrangements made to incur large expenditures. Orders for rolling stock and other urgent requirements for the newer lines have not as yet been placed. They are not likely to be until the policy of Parliament in regard to the railways is made clear. Another disturbing element is the question of railway rates. The report of the commission, and its decision is awaited with some anxiety. If rates are cut below present charges, on the whole, Government assistance will not avail much in the increase of business activity. Assuming that the policy of the Government and the action of the Railway Commission will be on constructive lines then our railways will have to place orders and proceed with improvements that will involve activity on a scale approximately the same as last
Last year one of the chief factors in making business active was the extent to which city building was proceeding. The laying down of sewer systems and pavements, the establishment of new electric and other public utilities made demands on our industries of an exceptional character. This year there will be a lull in this respect. It will do no harm. Meanwhile there has been a great housecleaning in so far as the disposition of municipal debentures is concerned. In the aggregate the municipal authorities oi the Dominion have not more than $30, 000,000 borrowed from the banks. A year ago the difficulty of getting money ir Canada was attributed to alleged wild and uncontrolled municipal expenditure At the present time all the municipal debentures that are being put on the market are being absorbed by investors. A year ago they were not marketable. This change is very notable, and it means the road is clear for further in this direction. Some will no doubt result.
The procurability of mortgage monej is also a promising circumstance. Build ing will be normal in extent if it does not reach the extraordinary limits of past few years.
With the demands of so many new cities temporarily satisfied, and the demands of the railways to so great an extern held up by the impending rate decision and the impending announcement of th* government’s policy; and with a marke« drop in the purchasing of implements bj agriculturalists, it could not be expecte«
that our industries would be active. At the moment of writing there does not appear to be much prospect of a change. Sooner or later the requirements of the railways will have to be met and there must also arise a demand for agricultural machinery. In the case of the former much depends on the action of Parliament but the latter depends upon the ability of the farmer to liquidate. Agricultural implement manufacturing is a considerable industry in the Dominion and at present it is very slack. Sales are not being pushed and will not be until the manufacturers get more of their money back. The time appears to have come when the farmer will have to pay more cash for the machinery he requires. Long dates and small cash payments are likely to pass away, or be considerably modified. Legislation has placed upon the shoulders of the seller of the implements burdens he does not like. His method has been to take abundant security and give lots of time. Liberty of contract has been, however, curtailed and in consequence the manufacturer will require more cash down. Until this re-adjustment takes place the agricultural industry will languish somewhat. Certain classes of industry, such as manufacture necessaries, are not feeling much depression. We do not include in this class textile manufacturers. They continue to feel the effects of depressed business. Generally speaking, industries at the present time are dull and the hope of recovery rests on anticipated resumption of activity of railroad equipment and building and tho recovery of the purchasing power in the West. The former may materialize this year but the latter will not eventuate until another crop makes further liquidation possible.