Stock Exchange Declines – Restrictions on Bear Operations -Unemployment – Industry – Foreign Trade – Revenue

«The Economist», 29 agosto 1931, p. 393

Turin, August 18

From August 6l to 19th the Italian Stock Exchanges have been enjoying the regular holiday which has gradually developed out of the old mid-August Ferragosto holidays, the counterpart of the London Bank Holidays. All operators are devoutly hoping that the recess may have a good effect on the tone of the bourses, which was going from bad to worse. The Milan index for certain characteristic dates was as follows:

A few of the thirty-five shares utilised in the index have gone down to a mere nominal fraction of their former price – Venice Cotton Mills (Cotonificio Veneziano) to 2.26 per cent.; Meridional Cotton Manufactures to 9.20 per cent.; Snia Viscosa to 8.27 per cent.; Officine Meccaniche to 1.38 per cent.; and Fondi Rustici to 3.37 per cent. Bonifiche Ferraresi have been dropped altogether from the list. In all these cases particular reasons can be given for the decline. The remainder have been brought down by the complete absence of buyers. Even the spurt after the Hoover move on reparations was short-lived.

In so lifeless a market bears may have a great psychological influence in provoking sales by weak holders, who have lost hope of seeing a ray of sun after so many rainy days. It is probably to counteract the bears’ attacks after the recess that a decree published in the official gazette of August 8th gives the Finance Minister new regulating powers in the field of bourse transactions. All sellers of futures can be obliged to deposit at the moment of order the securities sold or a cash cover to 25 per cent. The Minister can make analogous regulations for purchases of futures, and his regulations may cover all securities dealt in or only specified securities, and may relate to all bourses or only to those specifically named. As every purchaser had already the right of obliging the seller to deposit at once the securities sold for a future date, the new decree aims at generalising a rule which could hitherto be enforced only at the request of the interested party. It is hoped that these restrictions on uncovered sales will help to check the decline.

The best cure, however, would be an improvement in the industrial situation. Of that the omens are as yet not very sure. Unemployment was reduced from the peak of 765,325 at the end of February to 573,593 at the end of June, increasing again to 637,156 at the end of July. Other general indices of industrial activity are also doubtful. The electrical energy produced and imported decreased from 4,149.7 million kwh. in the first five months of 1930 to 3,902.9 in the corresponding period of 1931. Imports decreased from 9,545 million lire in the first semester of 1930 to 6,612.6 in the first semester of 1931. As exports decreased only from 6,535.4 to 5,112.5 million lire, the excess of imports decreased from 3,009.5 to 1,500.1 million lire. This is good for the present balance of payments, but probably bad for the future of industry. Imports of raw jute diminished in the first five months from 27,340 tons in 1930 to 19,433 tons in 1931; cotton from 109,791 to 83,561 tons; wool from 27,775 to 24,992 tons; broken pig iron, iron and steel from 444,828 to 236,080 tons; coal from 4,323,271 to 3,711,635 tons; mineral phosphates from 406,133 to 215,592 tons; and rubber from 6,807 to 4,428 tons. The average monthly goods carried on the Italian State Railways, which decreased from 5,028,000 tons in 1929 to 4,466,000 tons in 1930, decreased further from 4,440,000 tons in the first half of 1930 to 3,611,000 tons in the corresponding period of 1931. The number of passengers, which had already decreased from a monthly average of 9,740,905 in 1929 to 8,740,070 in 1930, decreased further from 8,308,655 in the first semester of 1930 to 6,910,676 in the same period of 1931.

Deposits in the Post Office Savings Bank increased in the first five months of 1931 by 697.6 million lire (from 13,047.2 to 13,744.8) and those in the ordinary savings banks by 415.7 million lire (from 17,229.2 to 17,644.9). Winding up of old companies and losses of capital so much exceeded the formation of new companies and increases of capital that the capital of joint stock companies decreased from 52,280,765,000 lire at December 31, 1930, to 50,823,703,000 lire at June 30, 1931. The sums cleared at the Clearing Houses, which had decreased from a monthly average of 108,128 million lire in 1926 to 55,370 millions in 1930, decreased further from 54,139 millions the first semester of 1930 to 53,960 millions in the corresponding period of 1931. Failures (ordinary and small), whose monthly average was 1,010 in 1929 and 1,133 in 1930, went up to 1,400 in the first six months of 1931.

Taxes are accounted for by the central accounting office of the Finance Department under 52 separate heads. Of these 16 increased in the financial year 1930-31 over the yield of 1929-30 and 36 suffered a decrease. The total increase was 458.8 million lire; but were it not for the increase in the yield of the wheat duty by 744.7 million lire and on that of the turnover or sales tax by 487.0 million lire, the result would have been far from satisfactory.