VOLUME XXI-No. 15 WASHINGTON, D. C. Reg. U.S. Pat. Off . * * * PRICE TROUBLE FOR BUSINESS: BASIS FOR DOWNTURN IN 1947 Dangers If Consumer Spending Falls Much Below Present levels Warnings of officials on cautioned that a further rapid price rise decline. These views are indorsed by de­ could "precipitate an early and severe ' partment stores, which are building re­ housing lag and declining price collapse." When the President noted serves against inventory losses due to price certainty of employment this warning, commodity prices had declines. More cautious buying by retailers reached an all-time high level. in furniture and other fields also is re­ An end to the rise in prices is coming Basic conditions that prompted this ported. into sight. Price declines ' are being pre­ warning indicate that nothing much can Other signs of a downturn are develop­ dicted officially for sometime in 1947. be done by the Government to reverse ing. The housing program is lagging, and Agreement is almost general that another these trends. September saw a drop in spending for con­ turn in the business cycle-this time a Consumer buyin g is running at a rate struction for the first time since January. downturn-is definitely ahead. of $126,000,000,000 a year-almost 70 per Forecasters in the Department of Agri­ Officials now are devoting more atten­ cent above 1941. It is unlikely that this culture look for a 20 per cent drop in tion to prospects of a downturn than to rate of spending can or will increase great­ farm-commodity prices sometime next current price movements. Rising prices at ly. Yet total spending should increase if year. Experts of the Federal Reserve present are viewed as the final spurt before all the goods to be offered for sale are to Board detect signs of looseness in the labor adjustment. The higher this spurt sends be sold at current prices. Officials conclude market, with the unemployed tending to prices, the greater will be the fall. That that something has to give somewhere. be jobless for longer periods. prospect is at the bottom of troubles con­ Business spending to build inventories The Price Decontrol Board, finally, sees fronting Chairman Roy L. Thompson of also is expected to decline in the months the time approaching when price controls the Price Decontrol Board. A new round ahead. The Steelman report doubts that will no longer be needed. Chairman of wage increases late in 1946 or early in inventory buying can continue at the pres­ Thompson told the American Retail Fed­ 1947 would be expected to accelerate the ent rate for many more months. When eration that another six months should see rise and hasten the drop in prices. production smooths out and pipe lines the end of most price ceilings. This view President Truman called attention to are fil led, the volume of inventory buying toward controls is backed by the Civilian this trend when he cited the latest report is almost certain to decline. Production Admini s tr~tio~ , which expects from John R. Steelman, Director of Re­ Officials thus see both consumer buying to liquidate its affairs by next March 31. conversion. (See page 83.) That report and business buying pointing toward a - Both these control agencies, thus, expect CHAIRMAN THOMPSON WITH DECONTROL BOARD MEMBERS MEAD AND BEll ·.the higher the 'prices spurt, the greater the fall OCTOBER 11 , 1946 13 cated as possible by the second half of are not likely to decline until after the 1947. break comes in farm products. The rise Government price supports are promised in manufacturers' prices was from 81 in farmers, but prices still could fall sub­ 1939 to 120 at present. This level promises stantially before supports are warranted. to prevail through the first half of next A more detailed study of farm crops sug­ year, but, if other prices start to drop, gests these specific declines: manufactured goods may decline to 106 Wheat, which now yields $1.79 a bush­ during the second half of 1947. el at the farm, could drop to $1.59 before Food prices can' be expected to follow supports are needed at the present level the trend in farm products. Foods have of other prices. advanced from 70 per cent of 1926 to 141 Corn, now quoted at $1.73 a bushel at pel' cent, and already are showing faint the farm, could drop to $1.15. signs of decline under reimposed price Milk, averaging 16.3 cents a quart at re­ controls. By the second half of 1947, the tail, could fall to 12.2 cents. prospect is that food prices may be back Hogs bring farmers $15.70 a hundred to 105 per cent of 1926. lJounds, and could drop to $13.05 before Reduction in farm-product and food supports would be required. prices is indicated by prospective increases Cotton, now yielding 35.3 cents a pound ill supply, regardless of changes in domes­ to the farmer, could drop to 22.94 cents. li(; demand. Record grain harvests promise Actually, a drop in farm prices is likely a decline in feed prices, which will reduce tc be accompanied by a drop in other the cost of fattening livestock and main -Alexander In Philadelphia Evening Bulletin taining dairy herds. Foreign demand also CUSTODY OF THE CHILD i, expected to subside next year. Textiles are due to rise in price through the pressures on prices and on supply to the next few months. Rising cotton prices ease by next spring. and supported wool prices almost assure Conclusions of official appraisers as to this trend. The index for textiles promises the time and duration of a coming price to advance to 124, from 70 in 1939. A decline are these: general price decline probably would carry Prices generally are expected to go on textile prices back to 105. A break in rising through this year and into the first cotton prices is expected to signal a dOWII ­ three months of 1947. Some spotty weak­ turn for textiles. nesses may develop, but the trend of the Metals and metal products, like manu­ price level still promises to be upward. factures, have been held down in price. The peak in prices is likely to be Now at 114 per cent of 1926, the rise reached sometime between January and immediately ahead is likely to carry mela April of 1947. After the peak, a period of prices to 120. In the decline, the drop iu hesitation in price trends is to be expected. metals may bring prices to 110. The break can be expected in 1947, per­ Building materials now stand at 1 3:~ haps around midyear or possibly earlier. per cent of 1926, compared with 91 per Thereafter, a period of declining prices is cent in 1939. A drop in the months ahead in prospect for several months. may carry this index back to 114. Price recovery will set in after the de­ Living costs now are at the same level cline has run its course. Indications are as in 1920, after the first World War. They that the period of decline will be relatively short, possibly a year or less. That means CEILING ZERO that 1948 is likely to see recovery taking hold, with prospects that 1949 will be the prices, which would drive down support first prosperous postwar year based on levels. Price supports for farmers come stability in production, wages, and prices. into plll,y when the relation between prices The extent of price declines is as received by farmers and prices paid by difficult to gauge as the time of the break. farmers is disturbed, a relationship deter­ Both time and extent will depend greatly mined by the Department of Agriculture's on the success of the Price Decontrol "parity formula." Board and other control agencies in check­ Other products besides farm commodi­ ing the rising trend that still persists. The ties and foods have been controlled more higher prices rise, the further they can be efl'ectively. Prices for nonfarm products expected to fall. Present developments in advanced from 81 per cent of the 1926 wage rates, labor efficiency and costs sug­ level to III per cent, and are likely to rise gest that the decline in prices will stop at tc 114 per cent before a break. A subse­ a point above the prewar level. quent decline promises to carry them down Farm commodities, which have ad­ no further than 103 per cent. vanced most, will be expected to fall fur­ Wholesale prices in general, including thest. A break in farm-product prices, in 889 commodities, have jumped from 77 fact, is expected to signal a general price per cent of the 1926 level to 126 per cent. decline. Using 1926 as the base year, farm The expected decline promises to send the products now stand at 157-that is, 2.4 index for all commodities back to 101. times the level prevailing before the war. Manufactured products, which also -White In Akron Beacon Journal A decline to 106 per cent of 1926 is indi- have been held under tight price controls, "AW, LET THE CAT DIE" 104 THE UNITED STATES NEWS Rise and Fall of Prices in T\vo War Periods (Index: 1926 = 100) 161 158 157 113 102 71 66 57 14 1920 1922 1919 1921 1914 1920 1922 * (ESTIMATED) * (ESTIMATED) * (ESTIMATED) peak was reached for most commodities same proportion, and all prices dropped by in 1920. The break in that year produced comparable percentages. During and after 154 declining prices through 1922, when recov­ the recent war, farm-product prices rose ery in output and prices began to take hold.