Price Chill

In March 1933, when Moody's spot commodity price index stood at 88, Franklin Roosevelt announced that commodity prices should go up. By March 1937, they had reached 220 on Moody's Index. Then Franklin Roosevelt announced that commodity prices were too high, thereby touched off a world-wide break in prices which many economists now consider the beginning of Depression II. Last February, when Moody's Index stood at 150, Franklin Roosevelt again sounded off on commodity prices, declared that with certain exceptions such as building materials they were again too low, should go up. This time, however, the Presidential edict seemed to have lost its magic. Despite renewed inflation in the form of desterilized gold and relaxed bank reserve requirements, commodity prices on June i reached the lowest point since 1934--130 on Moody's Index.

The present low level of commodity prices not only chills business confidence and causes inventory losses but slows public buying in anticipation of still lower prices. Result is a general stagnation which continues until stocks are so depleted that extensive buying must be renewed, forcing prices to turn upward. Last week, Standard Statistics saw no sign of U. S. business reaching this fundamental crossroad in the immediate future. Neither did Colonel Leonard Porter Ayres in his monthly sound-off. True, solid gains in crop prices on the report of bad weather and rust jumped Moody's commodity index to 136 last week. But a 25-c- drop brought the listed price of steel scrap to $10.75 a ton, positive proof that the key industry of steel had no immediate upsurge ahead. And the stock market last week again turned down without even approaching the 121 level on the industrial averages, penetration of which Dow theorists would have considered significant.

Among other items in last week's price news were two which surely pleased Franklin Roosevelt, one which offered some hope of business improvement: 1) The price of galvanized steel sheet was cut $3 a ton. Steel is one thing that Franklin Roosevelt still considers too costly and he has often remarked that the steel industry will not revive until prices are cut. But steel prices are as stiff as any in the country and this opinion bounced off steelmasters like BB shot off a tank. Last week it seemed that where Franklin Roosevelt had failed to dent their determination, continued bad times might succeed. 2) Building material prices last week hit a new low since 1936. In Franklin Roosevelt's last lecture on prices he remarked that a sharp increase in building costs last year nipped a promising building boom. Probably the most optimistic sign on the U. S. business horizon last week was the fact that building contracts in May were 27.5% over April 1938 and 16% over May 1937.

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