Show t DABSON'S r A I I TIC REPORT Run Rover N Prices and Inflation Upturns In selected corn om prices especially non ferrous metals are causing concern In some quarters These could be th the first signs of a broad price breakthrough on the upside within a few years Many are wondering whether this might be the forerunner fore fore- runner of a new wave ot of tion WHAT IS INFLATION NO O TWO authorities define inflation In exactly the same way ay The economist takes takes' one point ot of view the banker another an other the manufacturer a third and so on But they all boil down to this Inflation comes mes when the supply of money exceeds the supply of goods Such a situation occurs whenever er there is a big enough increase In government govern govern- ment or private credit to trig ger higher prices and higher prices and higher wages It Itcan Itcan can also occur when there isan is nn an Increase in the circulation of money because this has the same effect that more money would have I In very recent years careful money and credit management manage manage- ment by the federal govern ment especially the Federal System has kept n pretty much In incheck check Now that taxes are to to be reduced reduced re re- substantially it will be harder to hold inflation back FURTHER IN PRICES PRICES' I FORECAST that domestic wholesale commodity prices will show further strength in inthe inthe the months just ahead I base this prediction on the follo follow ing convictions 1 Costs are high and will rise further es during the first hall half of 1964 2 profit margins are unrealistically small in certain instances 3 demand which is already heavy will broaden consIderably when the tax cut becomes effective But I want to point out too that these plus factors are very nearly offset in many cases by large world supplies of raw materials as well by aSby strong col pressures in individual industries both bothin bothin in the US U.S. and in leading pro nations abroad CROP PRICES TO FIRM FIRl PUBLIC spending power could be increased by nearly 6 billion this year once the tax bill becomes law At first this will spur the effort to rai raise e the price level But later as the government applies the brakes In the form of higher interest rates and perhaps s some me credit restrictions manufacturers ers will likely have some se sec and ond thoughts I forecast we are arc not now headed for runaway price However in ht addition to price firming in industrial commod I look for a better tone in farm product quotationS quotation's though gains there wilt will pro ably be lImited During the past couple of years we made some good dents in the huge surpluses of u r a 1 products our government has been holding ThIs was helped by expanding exports due to crop reverses in Europe BUT TilE THE US U.S. last year also produced more food and feed stuffs than ever before so the surplus is still a problem Hence US U.S. crop prices can hardly be expected to show great or lasting upturns What ever gains over 1963 do occur will result from smaller livestock live live- stock and heavy purchases of grains for shi sl p p. meet ment abroad including those to Russia and her satellites CONSUMER PRICES While wholesale prices of at both agricultural and Indus trial commodities are moving up what will happen to prices at retail and to living costs I believe 1964 will see more of the same type of creeping inflation that we have had during duro dur ing the last few years Heavy total government spending atall at atall all levels is a big factor Inthis In Inthis this year to boost in consumer con con- sumer prices and living costs Waste and inefficiency in both government and private bust busl ness are arc also important Hence I see no early end to the steady decline in the purchasing ing power ot of the dollar DONT DON'T BE fooled by talk of government economy Total spending by public agencies will climb in coming years even though controls may case the impact Inflation is isby isby by no means dead In the early it if not before it could be our country's Number One Problem I |