STATE OF BUSINESS: Inflation Delayed

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"Of all the problems of defense mobilization," said Chief Charles E. Wilson last week, "the fight against inflation ... is the most subtle, the most difficult and the most important." But it did not seem so last week; there was too much evidence of deflation. Commodity prices were dropping (see below), and mortgage credit was tight. Last week Wilson promised builders enough materials to erect 850,000 housing units this year (40% below 1950), but the National Association of Home Builders complained that "the general disappearance of mortgage money" makes it highly doubtful that buyers can be found "for that many houses."

The strongest countercurrent to inflation was traced by the Federal Reserve Board in a cross-section poll of the buying intentions of 3,400 U.S. families taken during January and February. The board found that more U.S. consumers intend to hold on to their money during 1951; a smaller number than last year intend to buy an automobile, a TV set or a washing machine. Instead, they are salting away their incomes in savings accounts and U.S. defense bonds. As a result, personal savings rose sharply in May. Said the board: "These attitudes make the task of controlling inflationary pressures less difficult than it would otherwise be."

Consumers had stopped stocking up on goods, because many of the shortages which were forecast so gloomily six months ago have not materialized. Automobile production is running about equal to last year's rate. This week, the 3,000,000th car of the year will roll off U.S. assembly lines, almost matching last year's midyear total. Even with a 48% cut in production scheduled for the last half of 1951, the auto industry will hit the second biggest output in history for the full year. Despite retail price wars, retailers' shelves were still bulging with 29% more goods than last year. Businessmen who had thought that rising arms production would pinch the U.S. consumer by December now thought the pinch might not come for a year—if then.