23. The changes this year in our gold and dollar deficit are shown below.
Net Gold and Dollar Deficit()
(United States $ million)
Weekly Averages:-
1949 1st Quarter
April
May
June
July
August
Weeks ended:-
September:3.
.10
17
24
October
8
15
22
29
:
26
34
Au au
52
56
53
45
56
72
43
Devaluation
*17
18th September
34 surplus
20 surplus
3 surplus
20
15 surplus
::
.:.
:
...
(1) Met by drawings on the Canadian Credit and the International Monetary Fund, by assistance under the European Recovery Programme and by drafts on our gold and dollar holdings.
24. Since devaluation there has been a considerable inflow of dollar funds. Part of this has been for purchases of sterling which is accumulating on United States and other American accounts. Part has, no doubt, been used for settlement of debts previously incurred. So far there has been little recovery in dollar receipts by sterling area countries, but these are usually low at this time of the
year.
25. The changes in United Kingdom gold and dollar holdings are shown in the table below. On 17th September these reserves amounted to £330 million (at the old rate of exchange of $4:03 to the £).
Changes in United Kingdom Gold and Dollar Holdings
(United States $ million)
Decrease Increase
1949 1st Quarter
April May
•
June
July
::
::
August
Weeks ended:-
September
3
10
17
24
October
1
8
15
22
29
56
125
**
43
93
153
81
:
56
29
2009
14
Devaluation
4
18th September
80
29
19
2
40
General Balance of Payments
26. The final figures of the United Kingdom general balance of payments for the first half of 1949 were only slightly different from those forecast in the Economic Survey for 1949. The total deficit was £10 million and imports and exports were almost exactly as forecast. Between the first and second quarters of the year thegalance off payments was becoming more unfagr5B16. ofImports
6
contPage 56 bo high but exports fell from the Patee they achieved in the early months of 1949, largely as a result of South African and Indian restrictions on imports. The immediate effect of devaluation will almost certainly be to make the balance of payments still more unfavourable since import costs in sterling increase immediately, while any increases in the volume and price of exports will be more gradual.
27. The whole of the South African gold loan has now been repaid in sterling.
VI. Stocks
28. There has been a marked increase in the level of stocks during the last six months. The index of the volume of stocks of food and animal feeding-stuffs, raw materials and petroleum products (December 1947 = 100) increased from 94 in March to 110 in August, when it was 14 points above the level in August 1948. Some reduction is expected during the next few months, but the index in December is forecast to be 11 points greater than in December 1948.
Index of Volume of Stocks in the United Kingdom
(December 1947
100) -
Food and animal
Raw
Total
feeding stuffs
materials
Petroleum products
1948
1949
1948
1949
1948
1949
1948
1949
March August
95
94
96
93
95
.90
92
159
96
1,10
93
116
96
101
127
174
September 97
109
94
113
96
101
133
172
December
97
108(1)
98
114(1)
93
100(1)
145
170(1)
(1) Forecast.
Import and Export Prices
VII. Prices
=
29. The index of export prices (1947 100) fell back by one point in September to 113, while the index of import prices fell one point to 111. Although the index of export prices has been almost unchanged at 113 during 1949, prices of imports have been falling and the index in September was seven points below the peak achieved in the early months of the year. The effect of devaluation on this trend may not be seen for several months.
Retail Prices
=
30. The interim index of retail prices (June 1947 100) rose from 111 in August to 112 in September, the rise being chiefly due to a seasonal movement in the prices of certain vegetables. This is the first movement in the index since May, when the changes in the food subsidies added two points to the index. The chief rises so far this year have been in the food group, which has risen 9 points from 108 to 117. The index of clothing prices, which had risen 16 per cent. between June 1947 and January 1949, rose only slightly to 119 in September. All other items remained practically unchanged.
Wholesale Prices
31. The Board of Trade index of wholesale prices (1938=100), which has been tending to fall since June, rose between one and two points in September, largely owing to the effect of the alteration in the exchange rate on the monthly average prices of non-ferrous metals, raw cotton and imported wheat and flour. The index for food and tobacco alone fell two points, the higher prices for imported wheat and flour being offset by lower prices for certain fruit and vegetables. Industrial materials and manufactures rose three points, largely owing to the rise in basic materials.
32 As the prices used in compiling the index are average prices for the month, the full impact of changes in the exchange rates is not reflected in the September figures.
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