who tell us that since the fires of inflation seem at the moment to be under control, we should throw-away our fire-fighting equipment, and send the fire fighters home. Some even say that we should repeal the authority which permits a fire department to exist. It is this problem-perhaps even more than the steel crisis-which provides us as a nation with the real test of our wisdom and selfdiscipline. If we can pierce through the fog of emotionalism and controversy, and deal calmly with fundamentals, I am sure that we can survive this test. I believe that the Congress will extend the stabilization provisions of the Defense Production Act. I believe that the overwhelming majority of the American people want to see price control authority continued. They can visualize what would happen if Congress failed to extend authority for price stabilization. They know as you and I know that a great many prices would immediately begin to rise. Our cost of living, now at record levels, would resume its climb. Steel is our biggest problem, but it is far from being the only one. The Office of Price Stabilization is under constant and heavy pressure to. raise ceilings on many commodities in vital areas. With the defense mobilization program still gaining momentum and with purchasing power at a peak level, once an upward movement. were to start, it could quickly spread. Such an upward movement would soon affect even those prices which at present are considered soft. We must remember that every seller's price is someone else's cost. Businessmen, facing higher costs, would be under pressure to raise their prices. Consumers could find their cost of living going up even further and we all know that the cost of living is today the most significant factor affecting the wage level. Without direct controls we could again have a wave of scare buying and speculative inflation such as characterized the period from the Korean invasion to the general price freeze of January 1951. During the first 8 months after Korea, and without direct price control, consumer prices went up 8 percent-an average rate of 1 percent a month. Each 1 percent rise in these prices meant a $2 billion increase in the cost of living for American consumers. During the 14 months since the price freeze became effective, however, consumer prices have risen 2.3 percent-less than one-fifth of 1 percent a month-and well over half of this increase has been due to the rise of prices over which OPS has had no control. The index of consumer prices computed by the Bureau of Labor Statistics remained stable between December 15, 1951, and January 15 of this year. It then declined 0.6 percent from January 15 to February 15. But the figure for March again showed a slight increase. Although seasonal factors may give us approximate stability for the next few months, I think that we shall be doing very well if we can avoid a new peak in consumer prices during the next 6 or 9 months. As always in our complex economy, changes in the average Jevel of consumer prices are, of course, the net result of many diverse movements. Some commodities have gone up more than the average, some less, and some have declined. But the impression has been created that in recent months a large proportion of consumer goods, prices have come far down from their previous peaks. What has really happened? 97026-52-pt. 1-2 To get the facts, we have asked the Bureau of Labor Statistics to analyze the prices of all goods and services entering into its Consumer Price Index in order to ascertain what has actually happened to prices this past year. This index is an accurate reflection of the importance of each price in the total consumer expenditure. The latest breakdown which the Bureau has been able to give us was for March 1952. The full tabulation of the figures is in your hands. (The table referred to is as follows:) Classification of consumer price index items by percentage decrease in price from 1951-52 high to Mar. 15, 1952 with relative importance as percentage of ea h item in total index No decrease: Corn flakes. Corn meal Bread, white_ Milk fresh: Ice cream.. Vanilla cookies. Delivered. Milk, evaporated_ Bananas, fresh_. Potatoes, white, fresh_ Sweetpotatoes, fresh.. Relative importance in all items 1 0. 15 No decrease-Continued Relative importance in all items 1 0.65 . 60 .51 Physicians obstetrical care.. . 19 appendectomy, adult Specialist fees, tonsillecto .12 my, child.. 12 Dentist fees, filling-. .78 Hospital rates, men's pay 1. 07 1. 12 .65 1. 40 1. 76 . 62 .26 . 15 .03 .31 . 22 . 13 .05 Briquets, heating_ . 01 .76 Automobile.... Postage . 13 3. 29 Tires Water rent__ Gasoline . 24 .24 1.80 Auto repairs .66 Classification of consumer price index items by percentage decrease in price from 1951-52 high to Mar. 15, 1952 with relative importance as percentage of each item in total index-Continued Classification of consumer price index items by percentage decrease in price from 1951-52 high to Mar. 15, 1952 with relative importance as percentage of each item in total index-Continued 6 to 6.9 percent: Prunes, dried. all 10 percent and over-Continued items 1 Beans, green, fresh (17.5 percent). Cabbage, fresh (53.4 per 0. 23 .30 cent). 23 7 to 7.9 percent: Ham, whole 63 Lettuce, fresh (39.1 per .87 cent). .59 . 31 Tomatoes, fresh (24.3 per .69 .06 Tomatoes, canned (15 per . 62 cent) .47 . 12 Lard (25.3 percent). . 14 Shortening, hydrogenated (17.7 percent) · 36 8 to 8.9 percent: Pajamas, cot Salad dressing (11 percent) . 24 Oleomargarine (23.1 per ton, men's.. . 21 9 to 9.9 percent: Salmon, pink, canned. Strawberries, frozen__ . 07 Navy beans, dried. Yard goods, percale, cotton . 13 (13.9 percent)_. . 15 Hose, nylon, women's (12.4 1 Relative importance of individual items among all items included in the Consumers' Price Index (De-cember 1951). Mr. ARNALL. The study demonstrates conclusively that most consumer prices were, in March 1952, still at their peak levels or exceedingly close to them. It shows that items representing just over 50 percent of consumer expenditures were at their 1951-52 peaks in March of this year. Practically 71 percent were within 2 percent of their peaks, and 85 percent within 5 percent. Less than 10 percent were 10 percent or more below their peak. But important as consumer prices are, they do not tell the whole story. A good many commodities never enter directly into consumer purchases. Nevertheless they affect the consumer's and the taxpayer's pocketbook because they determine the cost of industrial equipment and plants, of construction, and of our defense program. Between the Korean invasion and the price freeze, the general level of wholesale or primary market prices advanced even faster than did consumer prices. According to the revised and greatly improved BLS Wholesale Price Index which was published a short time ago, wholesale prices for all commodities rose during those 8 months no less than 16.3 percent-just about twice as much as consumer prices. No one, therefore, should be surprised that some of these prices. came down. Some were rolled back by OPS directly; others by the reversal of speculative market forces which in large measure was the result of successful price stabilization. The latest wholesale price index is 3.6 percent below last year's peak. But it is still 12.1 percent above the level of June 1950. In the primary markets where these wholesale prices are paid by processors, manufacturers, distributors, builders, and the Government, diversity of price movement is always greater-and often very much greater than in the retail stores where consumers buy. has been especially great in the last year and a half. It Using the best available information and statistical techniques, our staff last month arrived at an estimate of the distribution of primary market prices early in 1952 in relation to 1951 peak prices (or to ceilings where these are now set below the peak). While this estimate cannot be as precise and detailed as the consumer price analysis, its results are significant. The figures show that of total wholesale transactions which now amount to approximately $273 billions a year-63 percent were being made at peak prices or at ceiling prices rolled back from their peak; 16 percent were at prices slightly below the peak, i. e., less than 4 percent below the peak or ceiling level; and the remaining 21 percent were at prices 4 percent or more below the peak or ceiling level. These figures are represented by a chart which I would like to show you. (The chart referred to above is as follows:) |