Prices: Soft

In its new mail-order catalogue, out last week, Chicago's Montgomery Ward & Co. cut prices on 2,000 items. Women's nylon stockings were down from $3.90 to $2.88 for half a dozen pairs, bedspreads from $14.97 to $8.90. aluminum storm-screen doors from $33.90 to $22.90, portable TV sets from $137.95 to $119.90, food freezers from $219.95 to $188. The dip-down in the Ward catalogue's prices is one of many indications that prices of goods are soft throughout the country.

The U.S. Labor Department's consumer price index shows that there have been recent reductions in the prices of new cars, tires, gasoline, refrigerators and other household appliances. While the cost-of-living index has edged up a bit more than 1% in the past year, most of that push has come from higher prices for services (see chart), such as medical care (up 3%) and public transportation (up 4%). Consumers are still clamoring for an increasing quantity of services, and are apparently still willing to pay handsomely for them. Service prices are high, partly because people are willing to pay for them, partly because services involve quite a lot of high-cost labor.

Wholesale prices have held fairly steady for the past four years, and have actually dropped since January. Manufacturers of some machinery, chemicals, drugs, primary metals, and plumbing fixtures have recently cut their prices as much as 5%. Steelmakers, who tried last April to raise prices, now are quietly offering discounts on line pipe (off 5%), upholstery-spring wire (8%), stainless steel sheets (10%), reinforcing bars (10% to 20%). Not all wholesale cuts trickle down to the consumer, but many do, especially in such hotly competitive sectors as appliances and gasoline. In Detroit the betting is that the new 1963 cars will not carry higher price tags.

The steadiness in wholesale prices largely results from intense competition. U.S. industry vastly expanded its plants to meet the backlog of consumer demand from World War II and the Korean war; but once the demand was satisfied, the need for goods slacked off, and 15% of the nation's productive capacity lies idle. Says one top Commerce Department economist: " We haven't used our capacity fully since the boom in 1957."

Government economists now see little chance of a substantial rise in prices within the next six months. They expect consumer prices to continue to inch up, largely because of increasing costs for services. Wholesale prices are not expected to rise more than one half of 1% -which would put them righ twhere they were in 1960.

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