Back to a Seller's Market

The new U.S. boom has passed a significant milestone. The buyers' market of the recession, said the Federal Reserve Bank of Chicago last week, has turned into the sellers' market of prosperity. Rising demand from industry and consumers has increased delivery time on new orders and created scattered shortages for freight cars and trucking rigs. It has also brought a short supply of labor in many skilled trades and slowed the rate of gain in output per worker as the number of jobholders has increased. "Under these circumstances," forecast the bank, "it appears likely that any substantial further increases in demand may exert additional upward pressure on prices."

Fresh signs that consumer demand is continuing to increase came last week from the Federal Reserve Board. It announced that consumer installment debt in June rose by $452 million (seasonally adjusted), the largest addition for any month since September 1955. The June increase raised total outstanding consumer installment credit to a new high of $35.8 billion.

Increases in manufacturing and trade inventories also continued to spur the economy's expansion; inventories rose to a total of $89.1 billion, an $800 million increase from $88.3 billion at the end of May. The inventory increases largely reflected a buildup of steel stocks in preparation for the strike which showed no signs last week of being settled. Merchants were also prompted by soaring sales. Despite the rise, the ratio of stocks to sales has edged down to the lowest level since 1951.

What all this means, said the Chicago Federal Reserve, is that the current price stability may not continue. Drawing a parallel to the 1955 recovery, when prices held steady, the bank suggests that prices may follow a similar pattern in the second half, then show a broad upward movement in 1960, as prices did in 1956.

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