The Economy: Now, Only a Murmur

The steel melodrama of 1963 started out like a familiar scene in a western movie: an embattled cowboy raising a hat on a stick to see if the foe fires at it.

This year the hostiles did not fire—and other cowboys suddenly felt free to poke up their heads.

The hombre with the hat was the Wheeling Steel Corp., the industry's tenth biggest producer, which was the first to announce price hikes in several categories of steel (TIME, April 19). One year earlier, the steel industry's ill-timed effort to raise prices had drawn a furious fusillade from the New Frontier. But this time there was only a mild murmur of protest from Washington and Palm Beach.

Tactical Blunder. President Kennedy was in no position to repeat his 1962 onslaught against steel. Having shattered business confidence once, he was politically reluctant to do so again. And the steel industry could make a pretty sturdy case for price increases. Its profits last year came to only 4% of sales. New York's First National City Bank recently published a compilation of percentage returns on net assets in various categories of industry, and steel tied meat-packing for last place in a list of 41.

This year, too, everything was handled differently by Big Steel. U.S. Steel Chairman Roger Blough, the industry's blunderbuss leader in 1962, kept his head down. Instead of acting in too-obvious concert, the industry's leaders behaved as if they had only just learned of one another's existence by reading the newspapers. In contrast with across-the-board raises in 1962, Wheeling's price hikes were highly selective. About all the reaction in public that the Wheeling increase got from Kennedy was a statement that he still considered across-the-board price boosts inflationary, but "selected price adjustments up or down are not incompatible with a framework of general stability."

All Quiet. The President might have done better to say nothing at all. By issuing even a mild pronouncement, he needlessly conveyed an impression that he continued to consider himself the ar biter of the industry's price decisions. And tactically, the statement was a blunder: by virtually inviting steel companies to go ahead with "selected price adjustments," he made it virtually impossible to fight later on if he decided that the increases were excessive after all.

Even so, steelmen moved with notable caution. After three days of silence on both sides, Lukens Steel Co., the 20th-ranking producer, upped its price on a few types of steel. All remained quiet on the New Frontier. Then third-ranking Republic got up its nerve and announced increases similar to Wheeling's, but not identical. Again, all quiet. The following day, after two more companies joined the wary parade, giant U.S. Steel finally raised prices. Its increases were noticeably gentler than Wheeling's: $4 on hot-rolled sheet and strip (50¢ less than the other companies), $5 on cold-rolled sheet and strip, $7 on galvanized sheet ($1 less than Wheeling), and nothing at all on plates (Wheeling and others had posted a $4.50 boost).*