MID-SUMMER—and the year half gone! What of those glowing prognostications made by banker and financier, by erudite economist and by practical business man for the edification of you and of me, as we sat down to breakfast with our morning newspapers on January 1, last? What did we read? “Canada has taken fresh heart during the past year. In my opinion the attitude of the people and the conditions resulting from that attitude are but forerunners of what will take place in 1926. I can only believe that we are headed toward an era of prosperity.” This is what Sir Henry W. Thornton, president of the Canadian National Railways had to say by way of forecast. And I could quote from at least a dozen utterances of similar character and all predicated upon that optimism which is basic with earnest Canadians.

But the point for observation at this time is the extent to which, thus far in 1926, Canada has succeeded in doing those things it was six months ago predicted she would do. Invariably on the threshold of each new year, Jack Canuck is placed upon a pedestal, not unlike the university “grad”, on graduation day. It is a moment for fulsome comment. It is an occasion for rose glasses.

But here we are with the year half run, starting down the home course, and what do we find?

At least encouragement is to be extracted from the statement of L. W. Hicks, of Winnipeg, president of the Investment Bankers’ Association of Canada, to that organization at its Jasper Park convention within the past month. “No such opportunity has occurred since the organization of this association ten years ago for more cheerful and optimistic outlook than at the present.” This remark is not without its own significance as emanating from an individual who, in his official capacity has ample opportunity for taking the business pulse of the country.

Analyzing Developments

NINETEEN TWENTY-SIX has not, of course, been without its vicissitudes. At the outset it was hoped that business might develop more brilliantly than it has succeeded in doing. There can be no gainsaying that politics has interfered. The tariff humors which Ottawa developed tended greatly toward commercial uncertainty, if not actual restraint. Then, when Ottawa settled down to definite attack on the motor industry, business men promptly proceeded to sit back in apprehension of further tariff tinkering. More than any other single factor this political interference served to check business in the first half of the year.

With prorogation in sight at this writing, business men breathe easier. They are at least assured no further meddling for another year. This should tend greatly toward business stability. And after all, if we can be assured stability we are more likely to progress.

There are many important considerations for those who desire to study the trend of business at the present time.

In this country there is always the crop to think about. We are essentially an agricultural country, more dependent probably upon agricultural production than any single industry. As President Hicks told the Investment Bankers the other day, “We hear almost generally from coast to coast the glad tidings of very much improved farming conditions, good crops and good prices, for practically all farm produce.” This should be music to the ears of every Canadian.

Further: “At the present moment,” as the economist of the Royal Bank of Canada points out in the bank’s latest commercial circular, “the position of the Canadian farmer is much more fortunate than that of the farmer in the United States, since the price of Canadian farm products is above the general price level, while the average price of the United States farm products is below this level. For some months the whole trend of basic commodity prices has been downward in both the United States and Canada, and, as usual, raw materials have suffered more than finished goods.”

The Dominion Bureau of Statistics Index for 236 commodities in April was 160.6 against 163.8 for January, while the April index number for Canadian farm products stands at 172.9. On the other hand, the United States Department of Agriculture Index shows that farm products of the United States stand at 146, as against a general price level of approximately 154. In both cases these index numbers are weighed in relation to the economic importance of the various prices going into the index.

Canadian Price Indices in 1926

100 = 1913 average

January Feb'ry

Farm products........ 173.0 167.5

Animal.............. 149.3 147.2

Foods............... 173.2 170.8

Textiles & products .... 187.9 185.9 Wood products & paper 159.7 159.8

Iron and products..... 147.5 147.2

Non-ferrous metals and

their products...... 105.9 105.0

Non - metalic minerals

and their products. . . 177.2 177.8

Building & construction

materials........... 152.6 152.7

All commodities....... 163.8 162.2

March April

163.2 172.9

146.1 138.0

169.0 169.3 182.8 175.9

157.3 156.9

145.7 145.0

105.7 104.4 178.6 177.0

152.2 150.4

160.1 160.6

The prevailing low prices for corn and cotton go far to explain the low average of agricultural products in the United States, while the high price of wheat, which is proportionately a much more important product in Canada, is a large factor in the prosperity of the Canadian farmer. The above table shows the index numbers of various Canadian products as compared with 1913 prices. From this table, and from the facts mentioned above, the conclusion may be drawn that the balance between purchasing power and consumption is being maintained in better proportion in Canada than in the United States.

It is cheering to know that our crop is away to such a good start, particularly in the Western Provinces. As a matter of fact, when this article appears actual harvest will be underway in certain sections of the country.

Another Crop Income

SO MUCH for the crop, which fortunately at this time is complemented by other interesting and important considerations. As a matter of fact, there is another crop which is in process of being harvested right at this moment throughout the Dominion. It is the tourist crop —a crop of increasing significance annually, a crop which last year, according to Federal Commissioner of Highways Campbell, turned back into the purses of Canadians an aggregate of $188,000,000. There is no minimizing the importance of the tourist crop to Canada. Whether tourists visit Canadian homes; whether they stop in tourists’ camps, which like mushroqms are springing up all over the country as part of the community service that alert towns offer; or whether they stop at our best hotels, they spend money here, and this spending in such vast volume undeniably is a potential business factor.

Trade statistics for April, which are the latest available, show that for the twelve months, exports total $1,328,700,000, a gain of twenty-one per cent. Imports total $936,100,000, a gain of seventeen and a half per cent. Canadian export trade is running at high level, but for the first time in two years the monthly total of imports has exceeded exports. The actual volume of goods moving at the present time is greater than the present figures indicate, because commodity prices several years ago were highly inflated. Canada’s favorable trade balance, accumulated month by month, is now in the neighborhood of $400,000,000.

“On the surface,” the Financial Post reminds, “this is an extremely healthy sign. Normally, it is indicative of improving conditions. A careful study of the trade figures, however, disclose the fact that almost the entire increase in our export has been made up of raw materials, or at least manufactured goods. In other words, a much heralded increase in our favorable trade balance is due to the fact that Canada exports the great bulk of her raw materials to manufacturing countries, and in turn imports the finished product. This naturally does not help Canadian manufacturing industries.”

What are we going to do about this situation, nationallythis situation with which is so intimately linked the problems of employment and further settling of the country with new population, by which we may hope to grow as a nation? The economist of the Royal Bank of Canada considers that, “there is nothing that need give us any concern in the fact that imports are exceeding exports.” He points out that we have had a long period of largely favorable merchandise balances and that the currency and credit structure of the country is eminently sound. He reminds, too, that Canadian funds have been at a premium in the world market for some time past, and considers there is no doubt that in the later months of the year when the seasonable movement of agricultural produce is underway the trade balance will swing back to a surplus of exports. In the meantime, he considers that we may interpret the present import surplus as a good indication of the purchasing power in the hands of Canadian consumers. High prices for Canadian farm products and this evidence of substantial purchasing power in the hands of Canadian purchasers indicates a condition of fundamental prosperity in the country.

Draining Natural Resources

THIS may be entirely true. On the other hand, one questions if this view does not overlook the great drain of our national resources. Take the pulp wood situation, for instance. Canada month by month is diverting to foreign labor a tremendous volume of raw material, which should be retained for manufacture in this country, for the further building up of that enormously expanding and wealth-producing industry, the pulp and paper industry. Here is an industry in need of no spoon-feeding. Here is an industry over which there need be no tariff quibbling. But, as an industry inherent to the country, it should be retained one hundred per cent, for Canadian labor.

Coincident with the general good health of the farming community and the consequent expansion of foreign trade are two complementary items which further reflect basic conditions. There is, for instance, the item of building, which for May totalled $57,000,000 compared with $37,000,000 a year ago, and which for the first five months of 1926, totals $140 -000,000, representing a gain of fifty-two per cent, over the same period of last year. Similarly, good health is reflected in the railroad returns. The Canadian National gross income figures for the first four months of 1926 total $76,501,000, a gain of 10.7 per cent. Net income totalled $9,689,000, a gain of 156.7 per cent. The C.P.R. shows a total of $54,201,000 for the first four months, a gain of 10.1 per cent., and a gain in the net showing of 63.6 per cent. The higher ratio shown in the gain of the C.N.R.’s net income is no doubt attributable to the fact that the C.P.R. has been more efficiently and more economically operated over a longer period than has the C.N.R.

But over and above all these considerations, the good returns of the two railroad companies must be accepted as very happy evidence of general business upturn throughout the country.

These are at least the high spots in Canadian economics, which are of interest to the man on the street at the present time. Clearly, we are by no means in a boom period, and there is no writing in the sky to indicate that we are approaching a boom period. The stock market, which is said to discount events six months hence, has been acting well of recent weeks, but there have been no sky-rocketing tendencies. The fact of the matter is, Canada is pursuing a fairly even keel at the present time. Perhaps this is the healthiest indication of all. Canada has not been receiving a particularly heavy influx of settlers so far this year—not even as large an immigration as was anticipated in January, when the forecasters were in their most cheerful mood—and as an offset to the immigration that we have received, there has, of course, been a certain drain of good Canadian-born to the United States, a problem, which, like the poor, is always with us.

Canadians turn into the second half of 1926, however, with a justifiable confidence in the business outlook—a confidence, however, which is not unmindful of the need of a greater political stability in this country, and without which the Dominion can scarcely be expected to proceed in its full stride. J. H. Fortier, that outstanding French-Canadian of Quebec City, who occupied the presidency of the Canadian Manufacturers’ Association last year, made this a living truth in his retiring speech to the association. Canadians, East and West, would do well to memorize—as part of their national creed—what Mr. Fortier so ably crystallized in the following conclusion: “I believe that the time is at hand when Canadians in all the provinces, of all occupations, and of various political faiths, will realize that there must be formulated and adopted a new policy of national development, that will stimulate and expand all forms of production and enterprise, that will protect and stabilize but not discriminate, that will give opportunity to present and future Canadians and that will bind all parts of this country in true and permanent Confederation.

“When that time comes, Canada, peopled by the descendants of the world’s great races, possessing all things on which success is based, and wanting little but unity of thought and action, will enter a period of intellectual and social advancement and material progress that will not only write new chapters in her national history, but will also place her definitely among the leading countries of the world.”