PRICES RISING

Evening Post, Volume CXVI, Issue 113, 9 November 1933, Page 11

PRICES RISING

BUT LESS BUSINESS

A CHECK IN SEPTEMBER

U.S.A. BAROMETER

In October, with the American sun* mer falling behind and the American winter looming up, New York economists had figures enabling them to sur vey the United States recovery movement up to the end of September. The October monthly statement; of the.National City Bank of New Yorkindicates that the March-April-May-June-July revival Jiad a set-back iii August and' September. In other words, there was in August and September a check to industrial expansion, though it left industrial production still greatly above the low point of the depression. United States agriculture is directly interested in the A.A.A. (Agricultural Adjustment Administration) and United States secondary industries are directly interested in the N.R.A. (National Recovery Administration) but the two necessarily interlock, like country and city. PRICE, PRODUCTION, NUMBER EMPLOYED. The common ground of both A.A.A. and N.E.A. is to increase prices. As one man's price is another man's cost, this means "to increase prices and costs." And increased prices and costs necessarily mean an increased cost of living (which has happened). The success of such price-raising depends on whether the buyer can-pay the increased price (to :enable the industrial buyers to do that, wages were raised); in other words, on whether the price rises not too much, nor too little, but just the right amount. If price (that is, all prices) rise just the right amount, then, it is calculated, production of all kinds will increase, and employment of all kinds will increase; and both N.R.A. and A.A.A. win be pronounced successes. Points to be watched, then, are price, production, and volume of employment. • Also, the degree of the rise in the cost of living. The August-September set-back is noted first and foremost in the slackened prodnction of a. number of secondary industries, including steel; for example, steel ingot production was at 59 per cent, of capacity in July and at 41 per cent, in September. ■ But meanwhile employment in these industries has increased, and the increased employment must sooner or later be . justified in increased production, or else (with winter coining on) the problem is intensified. PAYROLLS UP, OUTPUTS DOWN. Noting this conflict between lowered prodnction and increased volume of employment (or, at any rate, increased number of employees, for hours are' shorter) the National City Bank reports:— ' "The latest figures for employment and industrial payrolls are for tho thirty days ended August 15, in which period, according to the Department of Labour, 750,000 additional, workers were given employment by the industries, and payrolls were increased by 12,000,000 dollars weekly. These increases are in contrast to the decline in industrial production during the same period. As long as expanding output was reducing unit costs of the product, except direct labourists, it •might be assumed that part of the-in-creased labour cost could be absorbed, and the price advances restrained accordingly. Naturally this is not true . when production is decreasing, causing all unit costs to mount along with labour costs. The steel industry has had to face this situation and has accordingly advanced prices of some products for fourth quarter delivery." The recently cabled dispute with the President over the price of* steel rails bears on this. Higher prices for material reduce the labour-value of the President's big public works programme. FEAR OF NEW WAVE OF UNEMPLOYMENT. The National City Bank comments: "It is one thing to put people to work at the expense of increasing industrial costs, but may bo another to keep them at work if the market for the product is narrowed by the resulting higher prices. A reversal of the employment trend, in view of the rise in the cost of living, would bo a very serious development." Seeing that the secondary industries pay out most of the wages and salaries, their success is necessary if tho purchasing power of the public is to bo increased. Only in that way can the public pay the farmer the prices he wants. If N.R.A. increases prices and costs to the detriment of production— if, worse still, to tho detriment of employment, though falls in the number of employed are not yet reported, apart from strikes —then the factory is injured and the farm is not helped. The cost of living in August, as calculated by tho National Industrial Conference Board, was 7.6 per. cent, higher than in April. Retail prices of food, and retail prices of general merchandise, roso to about the sanle amount—l 9 per cent, from tho low point of tho depression. It should be noted that retail trade, as well as tho production of capital industries, showed a slowing down. / RETAIL PRICES: BUSINESS WAVERS. "In New York City, during tho first half of September, department store sales were 6£ per cent, below 1932, and as prices were probably 15 per cent. higher the volume of goods moved was obviously much smaller. Subsequent reports have been better, indicating that unfavourable weather and other temporary factors accounted partly for the decline. Nevertheless tho figures for the month, especially as related to the volume of merchandise sold, are unquestionably disappointing, and business sentiment his been unfavourably affected. . "Business men. recogniso that tho ability of tho public to pay\ higher prices at retail, as tho higher wholesale prices and increased costs of retailing are passed on to tho consumer, is the chief uncertainty in tho N.R.A. programme. If purchasing power fails to keep pace with the advance in prices tho warning signs will quickly appear in the retail sales figures. There is also some fear that consumers, who have been on notice that prices are going up, are laying in supplies 'for future use, and accordingly may buy less later on when tho real test of higher prices comes. "Tho disparities between prices, and principally the facts that prices offarm products and other raw materials have stood still or declined for many weeks while retail prices have ad- ' vanced rapidly, represent an unbalanced condition which is a threat against the resumption of the upward movement."