World business trends econstor Make Your Publications Visible. A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics Hamburg Institute of International Economics (HWWA) (Ed.) Article — Digitized Version World business trends Intereconomics Suggested Citation: Hamburg Institute of International Economics (HWWA) (Ed.) (1974) : World business trends, Intereconomics, ISSN 0020-5346, Verlag Weltarchiv, Hamburg, Vol. 09, Iss. 7, pp. 227-228, http://dx.doi.org/10.1007/BF02929095 This Version is available at: http://hdl.handle.net/10419/139048 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. www.econstor.eu WORLD BUSINESS TRENDS USA: Bad Growth Prospects for 1974 D u r i n g the first quarter of the year the cyclical downswing in the USA was accelerating under the influence of the energy supply crisis. Due to the season- al trend, GNP in real terms even declined by 1.6 p.c. (i.e. by a yearly rate of over 6 p.c.). Among the individual sectors the automotive industry was especially affected. But also in the manufacturing industry alto- gether the utilisation of capaci- ties has been decreasing more speedily since the beginning of the year. Adjusted for seasonal variation the decline of industrial production (November until March: - 2 . 6 p.c.) did not con- tinue after the Arab oil produc- ing countries had put an end to the oil embargo. Decline of Private Demand As to demand, private con- sumption further decreased dur- ing the first quarter due to the strong upward tendency of prices. As a consequence of the energy crisis, capital ex- penditure on equipment declin- ed. Private building again suffer- ed from the heaviest decrease. Against this there was a further significant increase in industrial building. The American foreign trade position deteriorated as compared with the preceding quarter. In terms of value, im- ports showed a much steeper increase than exports. Conse- quently, the balance of trade surplus diminished rapidly. In- crements of foreign trade are for the most part traceable to price increases. Between Sep- tember and March import ,prices - primarily because of the heavy increase of crude oil prices - had risen by 33 p.c., export prices by 11 p.c. Steep Price Increases The domestic tendency of prices to rise has strengthened until spring. Between January and April wholesale prices in- creased by a yearly rate of 14 p.c. Costs of living rose by a corresponding rate of 13 p.c.; finally they exceeded those of the preceding year by 1.2 p.c. The heavy advance in prices of industrial consumer goods was to a great extent caused by the rise of petrol and fuel oil. Stabi- lisation efforts were restricted to the Federal Reserve System's .policy of high interest rates. Be- fore the Administration aban- doned its income policy at the end of April, the price controls were gradually removed. The official controls had - at least during the second half of their almost three-years' employment - been nearly ineffectual in restraining the upward move- ment of prices and had only a one-sided dampening influence on the development of wages. Now wages threaten to give new impulses for price increases. After the end of the controls, workers might raise their de- mands in order to compensate for their real income losses of the last months. Since, however, prices for mineral oil products, food-stuffs and some industrial raw materials might exercise a dampening influence, prospects for a slight slowing-down of the inflationary process are not bad. Tendencies towards Economic Recovery After the calming of the ener- gy crisis there will be a re- covery in several economic sec- tors. Thus during the second Index Numbers of World Market Prices of Foodstuff1 and Industrial Raw Materials Index and commodity group HWWA-Indax * (1952--1936 = 100) Foodstuffs Raw materials other than foodstuffs . . . Fuels Raw materials for consumer goods .. Raw materials for capital goods Reuter'e Index (18. 9. 1931 : 100) Moody's Index (31.12. 1931 - 100) May 1973 I 163,7 158,9 166,1 153,3 171,8 175,1 905,4 S29,4 August 190,7 189,6 191,2 155,0 209,1 215,6 1175,1 678,9 i November 293,9 193,9 216,3 182,7 194,4 264,0 1217,7 671,8 February 269,8 241,5 283,5 340,9 198,3 283,0 1442,1 755,4 I May 313,1 258,1 339,7 469,8 180,2 317,0 1349,9 712,8 1974 May 31 308,6 256,1 333,8 469,4 178,9 303,9 1296,8 781,7 June 14 303,3 253,3 327,4 469,0 172,7 290,0 1266,7 795,8 Index compiled by the Hamburg Institute for International Eoonomlos. On dollar-basis. INTERECONOMICS, No. 7, 1974 227 WORLD BUSINESS TRENDS quarter, a slight increase of production might be noticed, which will counter a bigger re- duction of the extensive invest- ment plans. Hence the business enterprises' investment in fixed assets - in spite of the restrain- ing influence of the restrictive monetary policy - may be as- sumed to be the decisive factor in supporting production and employment. Since government expenditures, in view of the forthcoming congressional elec- tions, will probably keep their expansive course, a stimulating impact on demand and produc- tion can be expected, provided that there are no more reces- sive influences originating from private consumption. In this field the negative effects of the declining employment on in- comes might be opposed to the strengthened increase of wages. For the real outcome it will be of decisive importance whether the tendency of prices to rise will slacken and thus favour the development of consumers' pur- chasing power. Even such a relatively favourable economic trend will still be connected with rising unemployment. On a yearly average, GNP in real terms will only slightly increase. Raw Material Markets New Tendency on Raw Material Markets In May 1974 significant price decreases on world raw material markets could be noticed parti- ally. In London, the fall of the quotation for non-ferrous metals was 20 to 30 p.c.; and in New York sugar and cocoa became considerably cheaper, too. Alto- gether the price level on world markets for foodstuffs and indus- trial raw materials decreased by 4 p.c. from the beginning to the end of May according to the HWWA-Index on dollar basis. (Compiled by the Hamburg In- stitute for International Econom- ics). The large-scale price reduc- tions were concentrated on goods being greatly affected by spec- ulation. Reiterating purchasing waves created "unrestrained" price increases on these markets during the last months. Without doubt the flight into these raw materials was caused by the fear of an increasingly inflationary development and by uneasiness in the foreign exchange markets. The prospect of a cyclically con- siderably diminished increase of raw material consumption and a stronger expansion of raw material production has ob- viously been nearly ignored. On the other hand, an opposite development was, for example, that of the prices for cotton, wool and rubber, which declin- ed nearly continuously since the turn of the year 1973/74. On these markets the connexion between the development of basic consumption and produc- tion relations and the market behaviour has obviously been maintained. The question is now, whether on markets affected by specula- tion a change in tendency hap- pened, too. During the last months repeated price reduc- tions could be noticed already. But they were only short-term and technical reactions to the preceding very strong price-in- creases. In order to take profits the speculators offered raw materials on a larger scale. Fol- lowing the selling pressure the bulls bought very much and fast, effecting new price rises. This time, however, a changing ten- dency of speculative dispositions did not happen for several weeks already. This produces the impression that in general the boom on raw material mar- kets has meanwhile passed its highest level. Compiled by the Department on Business Cycles and Statistics of the Hamburg Institute for In- ternational Economics. PUBLISHER: HWWA-Institut for Wlrtschaflsforschung-Ham- burg (Professor Dr Heinz-Dietrich Ortlieb, Dr Dietrich Keb- schull) and Stiftung Deutsches Obersee..Institut (Professor Dr GOnther Jantzen) EDITORIAL BOARD: Chief Editor: Dr Otto G. Mayer Assistant Cldef Editors: Hubert HOping, Klaus Kwasniewski Editors: Claus Hamann, Albrecht Iwersen, Helga Lange, Sabine Schwarz, Klauspeter Zanzig Address: Neuer Jungfernstleg ZI, 2 Hamburg 36, Phone: (0 40) 35 62 306/307 Copyright by Verlag PRODUCTION AND DISTRIBUTION: Verlag Waltarchlv GmbH, Hamburg Advertisements: Representative Dr Hans Klomen AdverUslng Prlca List: No. 13 of January 1, 1971 Rates of Subscription: Single ISSue: DM 5.20; Annual rate: DM 60,- (Students: DM 24.-) Publication Dates: monthly Printing: Otto Schwltzke, Hamburg Address: Neuer Jungfernstleg 21, 2 Hamburg 36, Phone: (0 40) 35 62 5Oo Weltarcitiv GmbH 228 INTERECONOMICS, No. 7, 1974