War & Prices

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Into the mails last week went Montgomery Ward's regular annual bargain catalogue (good until Feb. 28). It met a roughly 10% cut announced two days earlier by Sears, Roebuck (except on refrigerators). Although leather prices have risen 10% since August, the catalogue's shoe prices are down around 10%. Grey-goods prices have risen 15%, but its cotton sheet and print items are down around 14%. Farm prices have risen 6% since August, and these reductions should give the farm section of the mail-order customers a powerful lift in buying power.

Sears and Ward were able to lower their retail prices in the face of higher wholesale prices because they began covering their needs through the first half of 1941 before price rises started. All through 1940's second half, they had manufacturers rushing delivery on the long-range orders they had placed at bargain prices. Meanwhile, department stores, who mainly had had less foresight, had to pay spot prices for rush orders in rising markets, and raise their own prices. The next question is whether Sears and Ward will have to raise their prices as they reorder in a rising market.

Last week this question was analyzed carefully in a long memo from the office of Isador Lubin, Commissioner of the Bureau of Labor Statistics. The memo recalls that World War I's first 16 months brought no price rise, that as late as December 1915 wholesale prices were only 6% above 1913, living costs only 5%. The early part of World War II presents a close parallel: when it started, the wholesale price level was 74.6% of the 1926 level, had been declining almost steadily ever since the end of the 1937 inflation.

In 1939's sorry first half (TIME, Dec. 30), the decline was sharpest in farm prices (by mid-August, 40% under 1926) and foods (34% under 1926). Before World War II, wage-earners' living costs were only 9% above the depression's low, while total wage payments were 60% higher.

On the night of Aug. 31, Hitler jumped Poland and on Sept. 1, the Bureau of Labor Statistics' Index of 28 spot prices jumped 4%. By Sept. 5, when England and France were in, these speculative prices were up 14% over August's average, by Sept. 22 they were up 27%—to a World War II high. The sharpest rise occurred understandably in import necessities: wool tops up 50% in two weeks, shellac up 74% in three. The more representative all-commodity index, reflecting industrial as well as raw commodity prices, reached a peak at 79.5, up only 6%.

But by the year's end, the false boom was over and prices slipped again. Although food staples from sugar to navy beans had boomed in September, the average wage-earner's food costs rose only 5% over August's level. By December, most of this was wiped out and living costs were lower than in December 1938.

From mid-December 1939 to mid-August 1940 prices fell 16%, their fall interrupted only by the Blitzkriegs against Scandinavia and the West. After each new offensive, prices continued their decline.

By Aug. 13, the index of 28 spot prices was only 5½% above August 1939, lard and hides were down over 35% from World War II's high, wool tops and wheat down 20%. Ten of the 28 commodities were selling under pre-war prices.