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During the year since we last met our economy

has passed through a relatively mild recessive-

phase. A depression which many feared and more than a few expected did not materialize. Now the commercial and industrial scene is brightening, despite the indications of winter unemployment. The new year seems to hold promise for most lines of production and most regions of our country. In many ways the events of 195 8 .present a note- worthy illustration of recession and recovery where over-all productivity is improving and where money incomes and rices have . a tendency to, rise together. In sue an environment ,_ e forces of busi- ness‘rei'adj‘tistment prdduce ii’l ellin'g-ofi of cut? ut rather than a serious decline, while the follow- ing forces of. recovery manifest themselves in notibeable upward movements of most indicators.

It now seems likely that the Gross National Pro— duction will have {a value fractionally above $32

, billion, or about 2% higher than in 1957. Allowing

for higher prices the Volume of production was probably little changed. Export trade has been well maintained, consumer expenditures have increased

moderately and capital investment has shown but.

a moderate decline. For a year which began amidst gloomy forebodings this cannot be considered as other than reassuring.

Toward the end of last year concern was ex- pressed in some quarters about the downward

. trend of capital investment. Yet a level of about

$8.5 billion may be achieved, a dec ease of less than 3%. There have, of course, bee ome notice- able changes in the com onents. Th e has been a drop in capital expen 'tures for manufach offset by an increase expenditures for housing which this year are estimated to reach an all time high of more than $1.7 billion, an increase of about $350 million over last year. Aggregate of ‘1958 capital investment will be somewhat less than in 1957 but isstill considerably higher than the total for 1956 which we habitually refer to as a “boom” year. By the second quarter of the year corporation profits before taxes emerged from the umnterrupted decline that dated from the end of_ 195 6 and there are signs of a steady and poss1bly improvnig trend in more recent months. There are some indications that business capital expendituresmay be moder- ately reduced next year but an improvement in business expectations during 1959 may bring some upward revision. 7 '

Value of consumer expenditure is apparently higher than a year ago but consumer price increases would just about offset this increase in terms of volume. As the population has increased by

some 460,000, per capita trade in terms of volume '

was sli t1 below last ear and it is thus the in- erease p3bpulation which has brought about the over-all increase in dollar volume in consumer buying. The Canadian consumer spends almost twp out of every three dollars paid for the nations goods and services and this year aggregate con- sumer expenditures exceeded $20 bilhon_for the first time. Through most of 1958 Canadians re- duced consumer debts, built up savmgs, and cur- tailed purchases of durable geods in favourof non- durables and services. The grownig liquidity. of individual Canadians and many busmess organiza- tions may well provide a base for further recovery during the period ahead.

There are indications that this year’s aggregate exports should come close to the level of last year

Main Doorway, Head Office Building

‘Climate to induce individual effort and

private investment is essential for growth”.

said Neil J. McKinnon, President, addressing the

92nd Annual Meeting of The Canadian Bank of Commerce.

but here too, there have been changes in com« ponents. At the same time imports have been reduced, principally of machinery, and this trend is allied with some decline in the level of foreign

v investment in Canada. The over—all deficit in

foreign trade on merchandise account will show a marked reduction as compared with last year. If the recovery in business activity in the United States is sustained, as is expected, the level of ex- ports 'from Canada in 1959 will be well maintained.

Production

Industrial production is, of course, affected by \ both domestic and foreign'demandfi'lt" emerged from its downward phase at the beginning of the year. Although volume has been adversely affected- through industrial disputes it has, nevertheless, im- proved to a level which, barring further work stop- pages, by now should compare well with last year.

Mineral production has been adversely affected by less favourable foreign markets and prices but there are signs of improvement in some, although not all, of its constituents. The total value of mining production for the year is expected slightly to exceed that of 1957. Neither the mining nor metallurgical industry, however, had an altogether favourable year. Iron ore output was affected until recently by the low rate of production in US. steel mills. A decline in price and world demand for base metals resulted in curtailed operapons in that field. The export market for western oil was re- duced, as was that for aluminum. On the other hand, increased shipments of uranium contributed substantially to the strength of export trade, and gold production was the highest in some years.

Farm net income this year may prove to be slightly below that of 1957 owing largely to adverse weather conditions in the Prairie Provinces. The movement of livestock into export markets and ‘ favourable price levels have been a source of sup- port. Wheat sales in the 1957-58 crop year were considerably above those for the prekus year and overseas clearances in the latter part of 1958 have continued at much the same rate. However, total Canadian supplies of wheat at the beginning of the new crop year, although below the level of the previous year, were still high and it-seems clear that world supplies of wheat Will be more than adequate in relation to marketsin the coming year. Unfortunately there are indications that more diffi- cult conditions may arise in commerc1al sales.

Resource Development

Although important natural resource projects are in the course of development we do not for the present see ahead of us programmes of the magni- tude of the St. Lawrence Seaway or the intense activity in the oil and gas fields that characterized the past few years. Oil and gas developments con- tinue but the greater emphasis for the present is in the distribution and utilization of products and by- products. Many mining programmes are under study and development and important expendi- tures are being made in preparing for new nickel and iron ore production. Although the work now going on is not as spectacular as that of a few years ago it is soundly based and undoubtedly we shall continue to see in the years to come a steady and important development of natural resources includ- ing the vital field of energy. The Royal Commission on Energy has recently submitted its Views in a first report to the Government. This Report has

The full text of the President’s and the Genera

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cThe Scene is Brightening’

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attracted widespread attention among those fae miliar with its field of study. A further report is to be submitted soon and it is apparent that the recommendations and their implications will in due course require examination with careful con- srderation of their possible influences on the development of the economy. '

Employment

.Continued population growth through the year - With an increase in the labour force represents one of the factors reflected in employment as well as unemployment. Unexpectedly for many, the num- ber of employed Canadians has been just about the same as last year. Notwithstanding this, un— employment in 1958 continued to present a prob: lent to Governments and private employers. The unemployment in this period was caused by a com— bination of circumstances which was more’than seasonal in character. In 195 7 our population grew exceptionally—about half a million—and the lab at force by 221,000. At least three out of five of these additional working adults in that year were minugrants escaping old terrors or seeking new opportunities. It is not hard to see why unemploy- ment was higher in 1958, a year when, temporarily, basic growth factors were weaker than they had been for some time. Population growth this year i has been at a lesser rate than in 1957. It may be expected that the underlying market demand in several key sectors of the economy, partly reflected in the high level of building contracts awarded in recent months, and supported by the stability of 1958, shOuld provide a foundation for further

progress in 1959.

Housing

Residential construction this year is creating a

new record with indications that completions may amount to 153,000 units compared with 117,000 last year. Of the total it now appears that 80% was financed by individuals and financial institu- tions and the remainder by moneys made available

, by the Government through Central Mortgage 8; Housing Corporation.

Financial Developments

For some years under expansionary forces federal revenues have been greater than rising expendi- tures, and surpluses have in the main been used to reduce the federal debt. This year we have seen another phase of so-called compensatory fiscal policy: the expenditure of greater sums of money than the existing tax structure could provide. Under the growth conditions which are characteristic of Canada we have had little experience with the

I implications of deficit financing. Under a dynamic

economic system there are bound to be recurring periods of advance and rest but we do know from “experience in other countries that long continued deficits can have seriously adverse effects on the price structure and on business generally. We in ‘ this country should set our sights on an equilibrium in the economy and a budget in some measure of balance. ' '

The past year has also seen a marked increase in money supply in the banking system but with some unused productive facilities there has been only a modest movement upward in prices and one which probablvaould have taken place in any event. Notwithstanding this monetary expansion accompanied by substantially enlarged holdings of Government bonds by the banking system, interest rates are now moving upward. Much of this trend has been influenced by developments in the United States where at least in part there has been a dis- inclination on the part of investors to buy Govern- ment bonds and a trend to other types of invest- ment.

Summary

Expenditures at all levels of governments in the economy continue 'to increase. Even excluding public business enterprises, government expendi- tures on goods and services new approach $6 billion a year. There are also those expenditures arising from transfer payments by governments to individuals which seem likely to be at a rate of $3 billion by the end of this year. In all, this repre- sents a very substantial sum in relation to total national expenditure.

Few Canadians fully realize the extent and signifi- cance of the influence on our country of government expenditures and budgetary, fiscal and monetary policies. The magnitude of this influence and its im« plications raise many factors—the level of govern- ment deficits, the rate of price increases, the possibility of increasing taxation—which give pause for thought. How can a climate favourable to private investment, individual enterprise and maxi- mum economic freedom be preserved? For ex- ample, in the period ahead there may be demands in some sectors of our economy exceeding the readily available resources which may be freely allotted to those sectors, and we must be conscious of the importance of maintaining freedom of action in the capital arkets to balance requirements of production an consumption.

There are many more allied considerations. Canadians have always been resourceful in their genius for finding the means of compromise and moderation and an increasing awareness will help to solve the problems of the future. The nation has been built on sources of individual enterprise, skills, imagination and creativeness with adequate incentives and rewards. A vital part of our national development must be to preserve adequate scope for these foundations for future growth.

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J. P. R..WadsWoi-th, Vice-President and General Manager, reviewed the balance sheet, highlights of which are summar- ized, and said in part:

The 92nd annual statement shows total assets to have exceeded for the first time three billion dollars and the increase from one year ago amounts to $435,097,000. This is the largest growth in one year in the history of the Bank. 1

The increase in money supply in the bankin system during the year was greater than the demand by business and individuals for bank loans so that quick assets represented principally by Government of Canada securities have increased.

Commercial and other loans at $1,011,352,000 ‘

decreased by $48,920,000. While the number of borrowing customers increased, public financing to fund temporary loans brought about reductions which more than offset the general increase in

.most classifications. The Bank’s activities in the

Personal Loan field, which commenced over 22 years ago when the Bank pioneered this service in Canada, have continued at a steadily growing pace. Since the inception of this plan over one and a quarter million individual loans have; been granted. The Bank’s participation in the year’s activity in the residential-construction field is reflected in an increase‘ of mortgages insured

‘ under the National Housing Act of 1954 of

$43,384,000. The total of these loans now on our books stands at $140,215,000.

Deposits no‘w total $2,818,400,000, an increase of $411,557,000. Both savings and other deposits reached new highs, while deposits from govern- ment sources in the aggregate remained about the same. .

The total number of banking offices at the end of the year stood at 807. During the year 32 new branch offices were opened, in new or growing urban and rural areas.

The Annual Meeting provides the opportunity of reporting on the part played by the personnel. The figures speak for themselves and represent the combined efforts of a group of morethan 10,000 men and women. However, even in banking, figures cannot tell the whole story. The day-to-day services to more than tv'Io million customers are largely of a personal nature requiring thoughtful- ness, understanding and courtesy. Behind this large group of front line personnel are all those whose roles are equally important in a supporting

or staff capacity. In addition, however, to the

various roles played during the business day there is the role in the community in which so many of our men and women play an important part. I am sure the shareholders as well as the Chairman and the President will wish to join with me in an expression of appreciation to all the personnel of the Bank for their ready acceptance of responsi- bility and the faithful discharge of duties as‘good

bankers and good citizens.

l Manager’s addresses may be obtained by writing to the Secretary, Head Office, Toronto.

THE CANADIAN BANK OF COMMERCE

407 BRANCHES TO SERVE YOU

ANNUAL STATEMENT HIGHLIGHTS YEAR ENDED OCTOBER 31, 1958 ASSETS Cash Resources (including Items in transit) .............................. .. 3 523,286,848 Government and Other Securitles .............................. .. '1,076,772,950 Call Loans ................................ .. 174,652,458 Total Quick Assets ............ .. $1,774,712.256 Loans and Discounts................... 1,011,767,250 Mortgages and Hypothecs Insur- ed under the N.H.A., 1954...... 140,215,347 Customers’ Liability under Accep: tances, Guarantees and Letters v. ' of‘Credit, as per contra 35,600,781 ‘ Other Assets 54,496,728 Total Assets ...................... .. $3,016,792,362 LIABILITIES 1 Deposits .................................. .. $318,399,750 Acceptances, Guarantees and Letters of Credit ................... 35,600,781 Other, Liabilities ........................ .. 16,624,747 Shareholders’ Equity Capital Paid Up $ 45,000,000 Rest Account .... .. 100,000,000 Undivicled Profits 1,167,084 146,167,084 Total Liabilities .................. .. $3,016,792.362 'STATEMENT OF UNDIVIDED PROFITS I Profits before Income Taxes .......... .. $20,162,347 Provision for Income Taxes .............. .. 9,950,000 Balance available for distribution “$310,212,347 Dividends ....................................... .. 7,198,544 Amount carried forward 3,013,803 Balance of undivided profits ’ October 31, 2,153,281 . 3 5,167,084 Transferred to Rest Account .......... Balance of undivided profits October 31, 1,167,084 ===

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