The Worst Is Yet to Come

The pressure on U.S. prices-especially consumer prices-is getting stronger every week. Plugged by the patriotic thumbs of 1,700,000 retailers, the dyke has kept consumers much drier than they may feel. Last week many a retailer prepared to rest his thumb, turn over the job to OPA.

While lecturing the National Farm Institute about his inflation fears in Des Moines last week, Leon Henderson dropped some startling new statistics. This year, he said, national income will be around $102 billions, while available consumers' goods and services will amount to no more than $65 billions (in terms of 1941 prices). Normal savings, plus the taxes now contemplated, will sop up only $22 billions of the difference; the other $15 billions will be "rattling around with no place to go." The easiest place for the $15 billions to go, Henderson knew, was into higher prices.

The U.S. retailers knew it too. They remember all too clearly the whooping price increases of the last war and the punishing 1920 inventory loss (estimated at $11,000,000,000) they had to take as a result. That was partly their own fault, because of the pyramiding effect of their "replacement-cost" pricing policy. This time they have done their best to keep the retail lid on. Their concerted policy of averaging costs has thus far kept retail prices to around 20% above their pre-war level v. an overall wholesale-price increase of 25%.

But retail prices in recent months have been rising at an accelerated pace: between last July and January, they rose 9%, as against 5% for the Department of Labor index of 889 wholesale commodities. This ominous trend is even more evident when compared with wholesale prices exclusive of farm and food products. The index for non-farm commodities (where Henderson's ceilings have been concentrated) has risen only 17% in the entire war period, and rose only 4% in the last six months of 1941. Moreover, Henderson's inflationary $15,000,000,000 has barely begun to be felt, and will press upon retail prices with infinitely more force than the waves of specialized hoarding (in sugar, rubber, canned goods, etc.) that have thus far tested retailers' self-restraint.

Last week, members of the National Retail Dry Goods Association (with ten other retail associations) offered Henderson their own plan for holding retail prices down. They hoped controls could remain voluntary, that continued average-cost pricing would be enough. But they talked most of how to handle OPA control when & if it came. On this, the retailers had two main suggestions: 1) that ceilings be selective, not (as in Canada) blanket, and apply only to widely used and acutely scarce products; 2) that any ceilings imposed take account of the time lag between retailers' buying and selling periods. If ceilings are placed at both the wholesale and the retail level as of the same date, retailers see gross unfairness to all of their members, bankruptcy for some of the weaker ones who buy hand to mouth-i.e., late and high.

At week's end there was no indication from Leon Henderson as to what he thought of N.R.D.G.A.'s proposals. Retailers showed notable self-restraint before Leon got his price powers; now that he has them, they hoped he would show the same.

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