First Break

A significant change appeared in the U.S. economy last week. Inflation was slowed down to a crawl, at least temporarily, and price cuts were sprouting like spring crocuses. Most startling example was in the television industry, which was supposed to be the first to be hard hit by arms production. It found to its surprise that even with cutbacks it was producing more sets than it could sell. Avco Manufacturing Corp. had already lopped $40 to $60 off the price of some of its Crosley sets. Last week Admiral Corp. cut prices $30 to $40 on its cheaper models, Halli-crafters Co. brought out two new low-priced sets, and it looked as if other TV-makers would follow suit.

There were other soft spots in price structure. After 19 weeks of steady advance, the Bureau of Labor Statistics' index of wholesale prices had declined fractionally in three of the past four weeks. Even food prices, the worst offenders, had leveled off for the first time in months.

In the textile market, some rayon prices were already down 12% from their peak, and sales were still lagging. Cotton traders, expecting a 16,000,000-bale crop this year (v. 10,000,000 in 1950), drove down the price of cotton for delivery next fall by $10 a bale, or 6%. In other futures markets, grains, sugar, coffee and cocoa were all on the skids; the Dow-Jones index of futures prices dropped to 204.90, off 10 points from its February peak and the lowest level in two months.

One reason for the halt in price rises was price controls. Another, and probably more basic reason: the ancient law of supply & demand. Consumers simply thought prices too high and stopped buying. In January, said the Commerce Department, wholesalers' sales to retailers were 53% ahead of last year; retail sales, on the other hand, have been running only 18% above a year ago. Retailers stocked up in anticipation of more scare buying, which did not develop. Unless buying picks up, many will be forced to trim prices to unload. Said one Atlanta retailer: "The test will come after Easter."

Some frightened businessmen were already murmuring that a recession was just around the corner. But there seemed no chance of that, since the defense program is bound to take up any slack. Nevertheless, many a businessman was suddenly reminded again that prices can go down as well as up.

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