Wholesale Price Explosion

As if to emphasize the gravity of the economic troubles awaiting the attention of the new Ford Administration, the Bureau of Labor Statistics on the very day of Richard Nixon's resignation released a set of statistics that showed inflation to be accelerating at an even more explosive pace than had been supposed. The wholesale price index rose a seasonally adjusted 3.7% in July alone, amounting to a compound annual rate of 54.6%. The jump was the biggest for one month since August 1973, when prices leaped 6.2% after the lifting of the Nixon Administration's second price freeze.

The most ominous trend was a turn-around in farm prices. They had declined steadily from March through June, but July wholesale food and feed prices soared 6.4%, or 110.9% at an annual compound rate. The rise will surely push up supermarket prices in another month or two, particularly for red meat and poultry. Future prospects depend largely on the weather; the July jump reflected the early effects of the searing Midwestern drought (TIME, Aug. 12), which will reduce food supplies.

But bad news was not confined to the farm. Wholesale prices of industrial commodities rose 2.7% last month, the ninth straight month in which they have increased at a double-digit pace. The index for fuels climbed 5.3% in July alone. Almost all types of machinery became more expensive. Factory prices of automobiles went up 2%--and are continuing to climb: one day after the index was released, General Motors raised the factory prices of 1975 model cars and trucks by an average of $480 or 9.5%, nearly duplicating in a single stroke the $500 in price hikes that automakers posted in five stages on their 1974 models. Indeed of 15 major commodity groups included in the wholesale price index, only one, lumber and wood products, declined, and that dip was not reassuring; it reflected the sharp drop in housing construction. All told, the wholesale price index in July was 20.4% higher than in the same month last year.

The magnitude of the rise came as a shock to Government officials. John Stark, executive director of the Congressional Joint Economic Committee, said that it "has dire implications for the consumer price index." He fears that it will "accentuate future wage demands" by workers who can see the buying power of their paychecks going down.

This file is automatically generated by a robot program, so viewer discretion is required.