The Price of the Boom

After tiptoeing upward for five months, living costs marched boldly higher across a broad front last week. In a pattern that had all the markings of the fifth general price adjustment since World War II (and the first since 1953), appliance makers announced increases of1% to 10% on TV sets, refrigerators, washing machines and electric ranges. Other manufacturers hiked their price tags on a wide variety of products, from mattresses to steel cabinets, rubber heels to beer. Scrap steel prices reached $63 a ton, a record high. Automakers estimated that 1957 cars will be from $30 to $300 more expensive than this year's models when they make their bows next month. Of 4,000 manufacturing companies surveyed last week by the National Institute of Statistics and Economic Studies, nearly 3,000 said they intended to raise prices.

While many businessmen blamed higher prices on the boost in steel ($8.50 a ton) and aluminum (1-c- per lb.). the adjustment in most cases also covered increases in wages, fringe benefits, raw materials and freight rates which had been nudging up production costs long before last month's steel strike. Led by a jump in food bills, the consumer price index, which since May 1953 had remained steady at around 114-115 (based on an average of 100 for the years 1947-49), started an uninterrupted rise in February, passed the alltime peak of 116.2 last June -and kept climbing.

Last week family budgets across the U.S. began to feel the impact. In Seattle barbers boosted haircut prices 25-c- (to $[.75). In Detroit the board of education warned that hot meals would cost the city's 272,000 schoolchildren 2-c- more this fall. Milk prices rose a penny a quart in Des Moines; bread jumped 2-c- a loaf in San Francisco. Diamonds were up 10% in Dallas. Clothing in some areas is going up 71%. Food also is expected to go higher, largely as a result of higher handling costs. Said a Memphis executive: "We're paying more in freight charges per cwt. on some items than we do for the merchandise itself."

The Eisenhower Administration, which has acted swiftly and boldly to counteract inflationary pressures in the past, was keeping a close eye on the market place last week. Government economists pointed out that price increases for competitive consumer goods, a natural phenomenon in a humming economy, tend to check inflationary tendencies. Moreover, the increase in U.S. productivity is keeping pace with the boom. At week's end, however, the Federal Reserve Board was reported ready to raise the rediscount rate, for the sixth time in 17 months, to a uniform 3%. The aim: to ease down on the boom before it gets out of hand.

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