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F«orm P . R. 5 1 1 TO FROM REMARKS: Meeting with P r e s i d e n t Roosevelt and Harold Smith a t Wiite House April 8 t h , 1942- CHAIRMAN'S OFFICE O RISE IN H&GES AND AGHCUXTUR&L PRICES COMPARED WITH RISE IN THE COST OP LIVING A comparison of the latest available date with a year ago shows that prices of agricultural commodities have gone up I4.5 per cent.and average weekly earnings of persons engaged in „„„ m1<h ""'••* manufacture by 2j? per cent, while th© "* COS * J ^ £ J ^ ^ 2 £ im-B S o n e up 12 per cant* Total industrial payrolls, which reflect both the growth in employment and in earnings, have gone up 40 per cent* April 8, Chart 1 is designed to bring out the faot that wages and salaries of the people have been increasing rapidly since the middle of 19^1; that they have been spending freely to buy goods, but that the output of goods for them to buy has not increased* The increase in production has been concentrated on war supplies* With the growing scarcity of materials and manpower it is likely that the output of consumer goods will begin to decline* It is the pressure of growing income on a shrinking amount of goods that holds the threat of inflation* Chart 2 brings out the fact that salaries and wages constitute a large part of thaincrease in total national income paid out* It emphasizes the need of control of wage and salary increases as a part of the anti-inflationary program* Chart 3 brings out the extraordinary increase in production since the bottom of the 1933 depression* This increase, which has been particularly rapid since the spring of 19hP, has represented principally the production of goods for war purposes* The output of consumer goods, however, also increased until the spring of Chart h shows the very rapid rise in prices, with prices of basic commodities going up most rapidly, wholesale prices of 900 camaodities following closely behind, and cost of lining lagging, but in recent months showing a more marked advance* Chart 5 compares -Hie course of prices of I4G basic commodities during the last war and during the present war up to date* What it shows is that up to the present time the course of prices has been surprisingly similar* Notwithstanding our greater awareness of the dangers of inflation and the many-sided efforts of combating it, there is little evidence up to date of better control than prevailed in 4 Chart 6 shows that parallel to the other inflationary developments there is a constant increase in the money supply* Up to date this increase has been constantly fed by sales of Government securities to the banking system* Adoption of a Treasury financing program that would reach non-banking investors to a larger extent than at present is a necessary part of an anti-inflationary program* The decline for r e t a i l sales in the l a t e s t month shoum reflects same reaction from an enormous volume of hoarding in January. WORKERS INCOME COMPARED WITH RETAIL SALES AND PRODUCTION OF NONDURABLE GOODS ADJUSTED FOR SEASONAL VARIATION, 1935-1939-100 PER CENT 160 PER CENT 1 160 V~^ I SALARIES AND WAGES 150 150 I 40 160 150 140 160 _ RETAIL SALES OF NONDURABLE GOODS 150 140 140 130 150 130 150 I PRODUCTION OF NONDURABLE GOODS 140 140 130 130 JUN. JUN. DEC. 1941 1942 THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM INCOME PAYMENTS MONTHLY BILUONS OF DOLLARS BILLIONS OF DOLLARS 9 9 8 8 SALARIES AND WAGES 4 ^ 3 r 1936 1937 1938 1939 1940 1941 1942 0 0 <V GOVERNORS OF THE FEDERAL RESERVE SYSTEM INDUSTRIAL PRODUCTION ADJUSTED FOR SEASONAL VARIATION, 1935-1939* 100 PER GENT PER CENT 200 200 180 180 fr 160 160 JJ 140 140 r fV 120 / 100 120 100 \ / \ V 80 80 -> V s v~ _ 1936 1937 1938 1939 1940 1941 1942 THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM COMMODITY PRICES AUGUST 1939 > 100 PER CENT PER CENT 180 180 - 160 160 - - 140 2 8 BASIC COMMODITI ES 140 r - - [\/ 120 s 120 100 100 140 140 120 120 9 0 0 COMMOI)1TIES S ^ - ^ - > s ^ ^ 100 100 L 120 120 100 100 1939 1940 1941 1942 THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM PRICES OF 4 0 BASIC COMMODITIES PRESENT WAR, PER CENT WORLD WAR, JAN.-JUL. 1939-100 JAN.- JUL. 1914 • 100 PER CENT 280 280 A - 260 - 260 «/ \ - 1 I 240 > 220 /A k - ! 200 \ I 1 1 I I f - 180 A/ I• WORI rif YYUIALL - i i •i I i I i • i I i l i i 160 i i f I - i - 220 - 200 i i i i - i • WAR WMrl 1 I - 240 180 I I iI i i / r 140 160 140 i i - 120 PRESEN T WAR 120 J/ - 100 100 - 80 80 1939 1914 1940 1915 1941 1916 1942 1917 1943 1918 1944 1919 1945 1920 1946 1921 FEDERAL RESERVE INDEXES BASED ON DATA COMPILED BY GENERAL MOTORS CORPORATION AND CORNELL UNIVERSITY. JUNE ESTIMATE BASED ON DATA FOR FIRST WEEK. THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM BANK HOLDINGS OF U. S. GOVERNMENT SECURITIES AND DEMAND DEPOSITS AND CURRENCY ALL COMMERCIAL BANKS \l 1 U. !s. BILLIONS OF DOLLARS 3ILLI0NS OF 001 50 50 / / 40 / 40 / m [>E 30 D DL"PI1 « I T iCUR R E N C ;Y A^ID / 1 30 r ^ / A/ 20 7 10 m 20 r m* 10 U. S. 60V ERNMENT SECUFMTIES / mmmm ^—^ 0 1912 '14 '16 '18 '20 '22 '24 '26 '28 '30 '32 '34 '36 '38 '40 THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
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