Big Jump, but No Inflation

Economists use computers and complicated formulas to plot changes in the cost of living, but the U.S. housewife has a simpler way. Says Mrs. Donald R. Petit, a Miami mother of three: "I spend $25 to $30 a week for groceries, and it comes out to $5 a bag. Last week, for the first time, they put $25 worth of groceries into only four bags."

Not to be outdone, the computers last week verified what Mrs. Petit and other housewives were noticing at the check-out counter. The Labor Department reported that the consumer price index in June scored the biggest in crease in the past two years, rising by one-half of 1%, to 110.1% of the 1957-59 average. Main ingredients in this rise were meat, which climbed 6.1% between April and June, and vegetables, up 4.5% .

What Goes Up ... The steaks, roasts and other beef cuts that now constitute 50% of the average American's meat menu cost 11% more last month than they did a year ago. Pork is 16.5% higher; in many places, pork loin has risen from 590 a lb., to 790, and bacon costs as much as $1 a lb. As shoppers substituted chicken for beef and pork, poultry prices inevitably rose by 7% (current U.S. average price for fryers: 380 alb.).

Ironically, meat prices are high primarily because steer and hog prices last year hit a seven-year low. Farmers responded to that slump by cutting their herds and reducing their feed bills, with the result that fewer and leaner cattle are now coming to market. At the same time, the vegetable supply has been shortened by acts of nature: drought in the Maine and Long Island potato country, heavy rains in the carrot, onion and lettuce fields of the Southwest. Beyond this, the Government's recently imposed restrictions on Mexican braceros and other imported farm labor have reduced the availability of migrant workers to pick ripening crops. Federal economists predict that prices will hold high through August--but then relief will come. Already some downturns are noticeable. Last week wholesale vegetable prices dipped and more cattle began coming to market.

The Real Prices. Other prices are climbing and may continue to do so. In June, there was an increase in the tab for beauty treatments, auto insurance, medical care and other services. Clothing tags are expected to rise 5% to 10% next month as a result of pay increases recently granted to textile and apparel workers.

Despite the increases, few economists are alarmed. The Labor Department reckoned last week that wage raises in this year's first half averaged about 4% --above the Administration's 3.2% guideline--but productivity continued to rise about as fast as labor costs. Thanks to recent reductions in excise taxes, new cars cost 2.8% less than they did last spring, and air conditioners are 5.6% cheaper. Also holding down prices is the housewives' habit of comparison shopping. To help them, New York City's Markets Commissioner last week ordered that price tags be put on every item, from pins to pet boas, sold in the city. Cried Tiffany's Chairman Walter Moving, objecting to the idea of tagging the jewels in his windows: "It would take the U.S. Army to make us do it."

Most important, the personal income of the average American continues to rise three times as fast as the cost of living. Said the Chase Manhattan Bank's bimonthly newsletter last week: "While price indexes may drift up gradually, as they have in the past seven years, the real prices people and business have to pay have not increased on the average. And this means that there has been no real price inflation."

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