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TKURSDAY, DEC. I2th, 1957 THE CANADIAN STATESMAN. BOWMÀNVILLE. ONTARIO PAGE KIN3C 'I. f Canada's Basic Trend to Growth "There is every reason to be optimistie about the longterm outlook for Canada and, in short term, elements of stabiliîy should be sources of reassurance," said Neil J-- McKinnon, President, addressing the 91 st Axinual Meeting of The Canadian Bank of Commnerce* W, HEN we met a year age the econemic atmo- ,phere both at home and abroad was ene cf boom. 'There were on aIl sides demands pressing tee hcavilv on available supplies cf materials and labour with the inevitable consequence cf marked upward pressure on prices. The eccnomnic envirornent cf te-day is in notice- able centrast te the strained atmosphere cf a year ago. The Grass National Product began te level off about mid-year and for the full year prebably llnet greatly exceed the 1956 level. Wholesalc prices early in the year developed a declining,-tendency and tis trend seems ncw te be gradually reflected in consumer prices whîch recently have lest most cf their upward impetus. Evidence cf the changed pace cf the economy is aise te be seen in reduced fneight car loadings. a cut- back in petreieum production te under one haîf of capacity, a lessened rate of growth ini censumptien of electnic energy and a lewered volume cf industrial production. The value cf sbipments te externat markets se far somewhat exceeds that ini the cor- responding period cf last year. Consumer expendi- turcs continije at a high level although there is some indication that the pace cf increase is lessening. White the number cf unemploycd has increased in a year when the labour force bas shown a marked increase, cmployment centinues at a higher level than last vear. TIHERE has emerged during the year clear evidence ef a condition that bas been building up for some AS>e-bift which bad been conccaled by demands for abnormally rapid industrial expansion and gevern- nment stock-piling: a situation in whicb capacity is equal te and in manv cases in excess cf current effec- tive demand for aIl forms cf consumer and capital goods and services. Prices cf many cemmedities which are freely tnaded i wonld markets declined noticeably in midsummer. partly d4e te incneasing production in relation te demand and partly due te a reversai cf the stock-piling policies cf other govern- ments reflected in sales centrasted to purchases. Some other commodities, the pices cf which have been maintained by gevernment support, have alse shown weakness, as net aIl gevemnments have been able te hold the stock-piles which their domestic pricing poli- cies have generated. This is most neticeably truc cf the United States in its international disposaI policies for agricultural prcducts. The accumulating evidtiue suggests that 1958 wil mark the fcurth time since the end cf the Second World* War that the Canadian.. economy will have passed thnough a peied cf significant adjustment. Each cf these occasions differs from the others in pattern and in degree. The first i 1946 reprcsented the transition beth demestically and internationally frcm war te peace-time conditions; the second in 1949 reflectcd some slackening in the initial post-war ex- pansion follewed by new stresses on the economy generated by the Korean conflict; the third in 1954 witnessed temperary adjustments in production and consumption. We have come tbrough anether upswing with many gains. The bueyant months cf 1955 and 1956 have culminated in a high plateau fer the ecen- omy in 1957. Although statistical indications identifv the recent expenience as a levelling-off process the plateau is rather uneven: in some cases declines are taking place white in others there continues te be a stcady if unspectacular advance. We new appear te bc entering 'à pcrîod cf consolidation fellowing this period of napid expansion during the past two y cars. D URING periods cf this kind there are awy deubts and misgivings about the future. This bas been the case in the several previeus readjustments since the end cf the Second Wcorld War. Although from the author's point cf view there is probably ne venture quite as profitless as an attempt te forccast the future there is no reason why we should flot address ourselves te the year 1958 and consider some of the major factors infiuencing the economy. The three principal ones which must be kept under scrutiny are expert trade, new capital investment and consumer expen- diture. In the case cf external trade, although the price cf a number cf naw materials has declined and te a de- grec the terms cf trade have turned against Canada, the aggregate dollar value cf experts stili holds up wefl. «Me future trend depends on the level cf ecenomic activity in cther nations and especially in the United ýtaIes. Although there are indications cf reduction in expert demand for seme produets, enlarged shipments cf ethers may well cushion a decline. As experts last year exceeded $4,800,000,000 and imports excecded $5,700,000,000 in relation Ie a Gross National Product cf neanly $30,000.000,000, it is evident bow important external trade is te domestic activity. The total capital investmcnt for 1957 is estimated te approach $8.7 billion, an increase cf $800 million over 1956 and $2.3 billion over 1955. Tftere are some indications that the total capital investment for 1958 will net be as great but this year's total at more than 28% cf Gross National Product is a very higb ene in- dced and is at a level wbich could net reasonably be expccted te be maintained. Although the composition cf capital investment will change, the total for 1958 will undoubtedly be a very large one by comparisen with any ycar pnior te 1956. Consumer expenditures, wbich represent nearly two-thirds cf the Gross National Product, continue at a high level altheugh the pace cf increase has slack- encd. This total is geverned net only by available in- come but by spending attitudes. Aggregate earned in- come currently appears te be running at a highcr level than a year age whîlc the ratio of consumer debt te inceme is slightly reduced. Canadians have in recent years shown a marked disposition te.spend. In 1954 for example, consumer expenditures rose centinuously at a time when there was a noticeable easing in other categories cf expen- ditures. Bctween 1955 and 1956 consumer expendi- turcs increased by more than 8% and in the early quarters cf 1957 this risc was continued but at a slower rate. It is likcly that the final figures for the year will show a levelling-off but that we shahl enter 1958 with a level cf consumer expenditures censider- ably above any ycar prier te 1957. Looking futher te the future, probably one cf the significant influences on the amount ef gross private investment is the level cf corporation profits. Gross pivate investmcnt bas an importance much greater than its actual dollar size. It net only represents the plans and aspirations of aIl business but aise con- tributes te persenal inceme withcut in the first instance adding a cerrespending amount of consumer gcods or services te the production side of national transactions. This year bas witnessed a shinkagc in the profit mar- gins of a number cf industries. lnvestment plans are, cf course, made in anticipation cf adequate earnings on the investmcnt and when the prospects arc net pro- mising such plans are likely te, be deferred. Many in- dustries are facing conditions cf ising costs while selling prices under cempetitive pressures cannet be raised. Business in such a position flnds it necessary te concentrate on stabilizing cests rather than on giving thought te further expansion. If prospects are inimical te enlarged investmcnt there is a diminution in one cf the important sources of employment of labour. IL dollar ternis, private expenditures for new indus- trial and commercial buildings, and for equipment, have more than doubled since 1950. During 1957, non-residential construction ccntinued te increase while expenditures on machinery and equipment showed some signs cf easing a lîttle. Ini housing a revival bas been in progress since about mid-year. It is doubtful if outlays on new bouses and apartments this year wili exceed 85% cf the unusually high level attained in 1956 but this wiil still nepresent a ver high rate of housing expenditure. Gevernment expenditures on goods and services which cover about a billion dollars cf public invest- ment-mostly in construction - have continued to in- crease ever their 1956 level. As goverfiments are spending in the aggregate about one dollar in six on behaîf of the taxpayers, it can be scen that public pro- grammes bold an important place in the ecenomic as well as the political field. The portion cf public in- vestment which goes inte noads, schools, public util- ities and into urban transportation facilities is one cf the important influences in the economy. Because cf this there is fully as important an econemic as political significance in the deliberations cf the councils charg- ed with settling the primary fiscal relation!t between cur three levels cf govemnment. Although many natural resource and industrial de- velopments required massive amounts cf capital, wbich could only corne from foreign sources, the in- cidence of taxation and the high rate cf consumption which are prommnent aspects of the welfare state tend te lessen capital accumulation - particularly the kind of capital that is apt te be venturesome. In a nation such as Canada, which did not previously possess a large and mobile reservoir cf capital, this condition meant that a very large part of our development, if it was te take place at al. had te be financcd by foreign investment which carried with it increasing ownership cf sources of production. The past few years have shown a continuance of this pattern in cur foreigri balance cf payments. Althougb Canada's foreign trade shows a large deficit on merchandise account, the Canadian dollar remains at a premium due te a stili larger net inflew of capital. A less assuring part of current trade lies ini the fact that although a large part of our imports is in capital goods which will add te future production, an increasing ameunt is in con- sumer goods. In other words, we are using imported capital which carnies a continuing obligation te service in order te finance part cf our current censumption. This is like a man borrowing te finance day-to-day living costs and, as we aIl know, there is a lirait bcyond which that cannet becentinued. A source of unempleyment duning 1957 was in those Canadian industries which depend on forest products. Here, tee, experts have tapercd off sharply, although the leng-term outlook remains favourable. Unempîcyment appeared in manufacturing, where durable goods production over a wide range of pro- ducts began falling off early in 1957. This decline in what had been a buoyant industry can bc attributed in-an important degrce te the premium on the Cana- dian dollar which has subsidized imports and served te displace both domestic production and employ- ment. Perhaps under the changed economic outlook which we are facing, it would be reasonable te expect the menetary authorities te exercise through the market an influence on the international value of the menetary unit te minimize this handicap both ta domestic produceit and te expert industries. 0 >rHERE has been much public discussion about menetary po]icy as reflected in money supply and in- terest rates and its influence on the economy and it is important te understand its limitations. While it is truc that a restriction i supply of money available can limit expenditures it must be recognized that it is the expendîtures themselves and net the money supply that are directly linked te the volume cf output and empicyment. Under conditions cf declining demand and lewered expenditures money supply tends te be a neutral element, adequate and willing te support an upswing but powenlcss in itself te create it. It may net be inappropriate te add that there has been a great deal cf unjustified and uninformed criticism cof what bas been describcd as tight money over the past two years. There may well be differences cf view as te the timing, nature and degree cf menetary influences ex- erted by the authonities but one thing is clear: if aIl the money had been made availabie for which there was a demand there would have been nothing said about tight money but there would have been much more vocal and much more justified criticisms of sharply nising prices. TIIHE year now'closing has established a Gross Na- tional Product of-more than $30 billion and we have had three years cf unprecedented advances in real out- put. We cannet expect te maintain this rapid pace every year but a period cf consolidation should not blind us te cur basic inclination te growth. Net only dees aur developing and under-populated country equipped with rich national resources have a basic in- clination te grow but this bias is being continually re- inforced with new sources cf energy-hydro-electric power, petroleum, natural gas and in the years te come nuclear energy for which Canada is a storehouse 'cof vast quantities cf uranium. People tee provide indi- vidual energy and creative resourcefulness anld this is fully as true cf immigrants as of the natural increase ini population. By ne means the least among the influ- ences toward grewth is the generation of new products in increasing varîety developed through scientific ne- search - most cf it conducted in larger and more ma- ture econemies, it is truc, but from which we gain benefit. Such things in recent years as synthetic fibres, plastics and electronics are examples net only cf new products but cf new industries. There is every reasen te be eptimistic about the long-termn outlook fer Canada and in the short term there are elements of stability which should be sources cf reassurance. If, however, we are- t c ihieve J. P. IR. Wadsworth, General Manager, reviewed the balance sheet, highlights of which are sunïrnarized, and said in part: The ninety-first annual statement shows total assets to have reached an ail-time hîgh at $2,58 1,695,000, an increase of $146,781.000 over the record figure for last vear. Deposits grew to a new high of $2,406,843,- (0(*. an increase of $127.746.000. Personal savings incrcased bv' $53,476,000 and new total $1,166,237,- 000. These figures become more meaningful when it ià realized that the Bank serves more than two million personal and business customers in 765 offices from Newfoundland to British Columbia and in addition 12 branches are operated abroad. Commercial and other boans, at $1.060,272.000 de- creased hy $8.608.000. I.oans in Canada rose while loans outside Canada declincd. In the administration of the Bank's lending business, it has been and con- tinues to be our policy te serve the worthy and con- structive needs of borrowing customners both small and large, provided they meet our standards of sound quality. The number of shareholders increased from 17,231 to 18,373 and the number of shares outstanding fromi 3,750,000 te 4,500,000. Twenty-four new branches were opened in Canada and we have established a new brafilc at Nassau and a second branch in London, England, in Berkeley Square. A report te the sharehoiders would flot be complete without a sincere expression of appreciation te al members of the Bank's personnel. The resuits have been accomplished through a team effort in whicli each member has had a part te play. Changing condi- tions have required an increasing amount of individual resourcefulness on the part of branch managers and officers. 1 would aise like te mention the important role played by the women in the Bank, and the increasing responsibilities that are being assumed by many of them. The part that they play is an important one and over the years te corne they will undoubtedly assume greater responsibilities in the operatien cf the Bank'@ affairs. The steady growth and development of the B anlc provide ever increasing opportunities for the able young man who wishes te make banking his career. Be he a high school or college graduate there are ini- creasing opportunities and such a young man will find that a banking career is rewarding flot onty in a tan- gible way, but in a sense of personal accomplishment. The profession presents a challenge te the young man who wants te work and take advantage cf oppor- tunities that are afforded te study and te learn on the Way up. ANNUAL STATEMENT HIGHLIGHTSI YEAR ENDED OCTOBER 31, 1957 ASSETS Cash Resources (including items in transit)....................... $ 411,964,082 Government and Other Securities ........................ 718,841,975 Cal Lans.......................... 218,849,356 Total Quick Assets ........$1,349,655,413 Loans and Discounts ............1,060,681,077 Mortgages and Hypothecs insur- ed under the N.H.A., 1954.. Customers' Liability under Ac- Letters of Lredit, as per contra 27,869,329 Other Assets........................ 46,657,864 Total Assets..,...............2,581,695,390 LIABILITIES Deposits ............. ........ $2,406,843,038 96,831,707 Acceptances, Guaraintees and Letters cf Credit ............ Othe Lbltes.......... Catal ider'uity496,2 Capt al PdUp $....4,873,440 Rnest Accots89,153,441 TodtaidedaProits .2,153,281... STATEMENT 0F ÙNDIVIDED PROFITS Profits before Incomne Taxes .......$16,960,242 Provision for Incarne Taxes .. ... 8,406,996 Balance available for distribution. $ É,553,246 Dividends ...................... 6,690,602 Anount carried forward.,...........$ 1,862,644 Balance of undivided profits October 31, 1956 ..........290,637 Balance of undivided profits October 31, 1957 ................$ 2,153,281 27,869,329 '10,019,582 136,963,441 The full f.xt of the President's and the1 General Mono ger's addresses may be obtained by writing ta the Secretary, Head Office, Toronto. THE CANADIA.N BANK 0F COMMERCE ! -, I (fi il j, ~ S4 "i UA J. I rfflry r TRVMDAT, DEC. 12th, 1957 THE CANADIAN STATESMAN. BOWMANVILLE. ONTARIO