Boost for Steel

As expected, U.S. Steel and the other major producers last week announced an increase in the price of steel. There was no across-the-board boost. Instead, the increase was in "extras," i.e., charges tacked on base prices for special processing of such products as carbon steel bars and rails. The rise in extras, steel users estimated, ran up to $6 a ton.

The public did not notice the increase. But fabricators, who are well aware of the steel industry's good earnings (see below). did. (So did the steelworkers. whose demands for another wage increase were called unjustifiable last week by Big Steel's Ben Fairless.) The fabricators raised the question whether steel, the bellwether of the economy, did not have a responsibility to hold the line on prices, now that the economy had been freed of controls. As one steel user said: "Either these fellows are going along with the new Administration or they aren't. I think they should come out in the open and admit they aren't."

How much of the increase would be passed on to the public by steel users was questionable, especially as some companies were already worried about sales. At its Grand Rapids, Mich, appliance plant. Nash-Kelvinator reduced output of refrigerators and laid off 400 workers. But companies such as Westinghouse went right ahead with plans to increase output, and U.S. industry as a whole showed little slackening of its record production rates.

The steel price rise came when other commodity prices, notably in food, were slipping. The farm parity ratio dropped to 93 (v. 100 a year ago), its lowest level since June 1941. As many prices softened, money hardened, under the influence of the Government's higher interest rates on its new bonds (TIME, April 20). New York banks raised the interest on prime (i.e., the best credit rating) loans from 3% to 3 1/4%, the highest rate in 19 years. The effect will be to tighten up on consumer credit. In short, at a time when tighter credit might cause a slowing up of sales, the steel price rise made it harder to cut prices, if necessary, to keep goods moving.

Paradoxically, another hard-money move last week will probably liberalize credit instead of contracting it. The Treasury approved an increase in the allowable interest on G.I. loans and FHA mortgages from 4% to 4 1/2%. The aim was to draw more new money into the home mortgage market, which had just about dried up at the old 4% rate. With construction already running 6% ahead of last year, the housing industry expects that, with the boost in interest rates, the number of houses built this year will be over 1,000,000--the second biggest year on record.

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