Upward March

After standing at unaccustomed ease through the spring and most of the long summer, prices are beginning an upward march. The consumer price index, which had been slowly creeping up earlier in the year, increased 0.4% in July to a record 116.5--or 16.5% above the 1957-59 base level. More significant was a stirring in the cost of basic industrial products that generally foreshadows general price trends. After five months of stability, industrial goods rose a substantial 0.3% in August.

The figures do not even begin to reflect many increases announced over the past several weeks. Since the beginning of August, higher prices have been posted in film, trucks, lumber, aluminum sheet, color TV sets, rubber tires and many electrical appliances. Hardly a day goes by without new rises in one chemical or another. Last week it was liquid chlorine (used in bleaches, paper, textiles) and glycerine (paint, explosives), which got an average 3% price boost by Dow Chemical Co.

Belated Astonishment. The Administration has long been citing the danger of a renewal of last year's price spiral as an argument for its tax bill, and now is using the figures to lend an unusual urgency to the pitch. In a generally rosy report on the economy last week, Presidential Adviser Gardner Ackley was moved to emphasize "unwelcome but convincing indications of inflationary pressures ahead."

Steel was the key indicator, and its upward climb promised a renewal of public jousting over prices between the Administration and industry in general. Since January, steelmen have been boosting prices in bits and pieces--in tubing, then tin plate for can making, followed by hot-rolled carbon and alloy plates--with only a whimper from Washington. Not until just before the Labor Day weekend, when Republic Steel dropped word of new prices in steel bars, did the Administration react. Ackley condemned the move, professing a belated astonishment at the fact that higher prices have already been chalked up "for nearly half the steel tonnage produced in this country," and a flock of telegrams urged other producers not to follow Republic.

Nothing doing. Joining Republic almost immediately, U.S. Steel pointed out that it, too, was "very mindful" of the inflation problem, especially the way that higher costs plus an automatic 3% rise in employee payments Aug. 1 were squeezing earnings. Other producers followed, and the Administration did not press its fight. At 1.8%, the bar price rise was small indeed. But the industry is now on notice to be wary of taking the rumored next step: a boost in sheet and strip steel, which as a key auto-industry item would be certain to have wide impact.

Rusty Machinery. Generally, Administration economists are suspicous of the reasons given for the price surge. They concede the need to prop profits against the pressure of higher wage, transportation and other costs. But with industrial plants running at a slack 85% of capacity (v. last year's 91% peak), they also suspect business of using any pretext to raise prices in order to reap a windfall of earnings as the economy picks up. Reflecting this root distrust, Ackley recently took special pains to chide the rubber industry for following a strike-forced labor settlement that was "clearly out of line" with price hikes "even greater than the added costs of the wage agreement."

One reason for the bureaucrats' suspicion is simply that the August industrial price surge caught Washington by surprise. Through the months of relative price peace, the Government's inflation-watching machinery has grown rusty. Commerce Secretary Alexander Trowbridge, who had scheduled a routine hold-the-line price pep talk with steelmen in Washington for this week, was caught flat-footed by the bar-products rise. Unless and until the machin ery gets back into well-oiled condition, there are bound to be more squeaks and squawks ahead.

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