Flood Tide

Prices surged against their controls last week with the force of an angry sea. The miracle was that the dikes checking the flood of inflation held as firm as they did. In some places the controls had already cracked, and prices spilled through.

Commodities. The Bureau of Labor Statistics index of commodity prices crept up another fraction of a point, reached 104.9% of the 1926 average--a new wartime highwater mark. As usual, higher prices for foodstuffs contributed most to the rise.

There were plenty of signs that food prices would continue to rise above the dike's top. Item: in Washington last week Senator John H. Bankhead, in a one-man exposition of a legislative bloc at work, blandly predicted to U.S. farmers that the Commodity Credit Corp. would continue for another year its open-purse support of agricultural prices.

As every commodity trader knows, the farm bloc's votes are as good as Bankhead's expansive promises. Therefore the traders cheerfully hoisted cotton prices another $1.30 a bale, pushed grain prices up 1 1/4-c- to 2-c- a bu.

Textiles. The long awaited orders to roll back textile prices 6 or 7%, and to allocate cloth to producers of low-priced goods, was ready for enforcement. The more obstreperous groups in the textile industry greeted the order with cat calls, others met it with stony silence.

The Cotton Textile Institute trumpeted the charge that the order would slash cotton-mill profits by some $300 million a year. OPA's Chester Bowles angrily replied that such a charge was "fantastic." The price boss, patently worried about the runaway textile market, estimated that mill profits at the beginning of 1945 were running at the rate of about $365 million a year (v. $28 million a year average in 1936-1939). He said that his fight for lower textile prices would lop a mere $40 million off these lush earnings.

Meanwhile the U.S. consumer was not being very helpful. U.S. income payments in December had reached an all-time high of $14.4 billion, and the consumers seemed to be less concerned than OPA about the cost of clothing. In New York City wearing-apparel sales during the week of Feb. 10 were 22% higher than a year ago; department-store sales all over the U.S. were up the same amount.

Steel. To help offset the boost in wages granted in December to steel workers, steel producers were allowed to make another increase in their prices. Last week OPA approved a price rise of $1 a ton for pig iron. In theory, this $60-odd million markup was simply a bookkeeping transaction; most steel companies make their own pig iron, thus will bill themselves for the added cost. But in good bookkeeping practice, this big hike in the cost of steels' raw material must be translated into higher costs of the finished product.

Black Markets. Inevitably, trade was brisk in the black markets, where the only challenge to prices was the law of supply & demand. OPA announced the seizure of 50 million red ration coupons (enough points to buy a total week's supply of beef for U.S. civilians), worth an estimated $2.5 million to the counterfeiters. This rich haul surprised no one in OPA or the meat industry. The only secret about the vast nationwide black market in meat is the exact number of millions of animals diverted to this trade each year.

The scope of the cigaret black market was easier to pin down. In Manhattan probably 20 to 25% of all the cigarets for civilians were moving through the black market. Result: many a smoker was glad to pay 50-c- for a 17-c- pack of cigarets, more than glad when a black marketeer gave him a chance at a carton at $2.50 to $3.

Stocks & Bonds. In the financial markets the flood tide of rising prices ran full and swift. The bull market was reaffirmed as the Dow-Jones industrial average reached 158.24, highest point since November 1938, while the rail averages were at a new year high, back to August 1937 levels. The Dow-Jones average of 40 bonds soared to 106.1--the highest peak since 1915 when the series was started. War babies and peace stocks equally shared the boom. Surplus money had found another haven, where it made even more surplus.

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