Show I PROSPECTS FOR INDUSTRIAL PRICES By Babson's s Reports Incorporated Incorporated Well Wellesley sley Hills mils Mass MassA A central theme in recent dial i of the business situation situation situa situa- tion ton has been the continued su substantial sub substantial sub sub- in industrial prices Inflationary pressures predominate In the various sensitive sensitive sensitive sen sen- Indices as well as in the Bureau of Labors Labor's Index of Industrial Industrial Industrial In In- Commodity Prices Where We WI Are Industrial prices at wholesale as measured by the Bureau of Labor Statistics are more than 10 30 per cent above their 59 1957 bas base Nearly one third one third of this Increase has occurred within the past year Beginning In January January January Jan Jan- uary 1968 moderate price upturns upturns upturns up up- turns gave way to more widespread widespread widespread wide wide- spread and cumulative move move- ments Expanding demand for Industrial industrial industrial rial raw materials and products gave a heavier upward push to prices Such pressure was of course materially increased inthe in inthe inthe the case of items in hi short or even narrow supply Added to these influences was the Impact of higher taxes such as the 10 30 per cent federal surcharge and the proliferation of state and local levies Burden Burdan of 0 Rising Labor Costs Cost But there was also pressure stemming from the burden of rising labor costs It Is this latter latter lat lat- ter force that has played a big role in recent advances in industrial in prices Time was when Industrial prices included basic commodities and a moderate number of other items Today Ind industrial items include many more finished and semi semi finished finished products The result Is that a a. a growing number of these Industrial items are much less affected by fluctuations fluctuations fluctuations In the prices of their component raw raw materials than by changes changes up up or down down- downin In unit manufacturing costs In 1967 a number of Important labor contracts came up up for negotiations and their settlements settlements settlements settle settle- ments were costly to management management manage manage- ment and consumers 1968 agreements agreements agreements agree agree- ments were were were- even more costly and their Inflationary influence will be felt for quite some time timeto to come Term Near Out Look We are convinced that Industrial industrial industrial rial prices are more directly and more importantly Influenced ed by trends in labor and other costs Including taxes in the totality totality tot tot- of their impact than by supply-demand supply ratios and and or or trends in quotes for industrial raw materials Accordingly the Babson's Baboons Reports research staff forecasts higher industrial prices pric pric- es between now and midyear and probably beyond that point Still heavier expenditures for defense plus defense plus larger total outlays outlays outlays out out- lays be federal state and local governments combined lie combined combined lie just ahead These together with advancing advancing advancing ad ad- labor and transportation transportation transportation transport transport- costs and expanding personal personal per per- personal Income will outweigh for for forthe the time being at least least grow grow growing ing world supplies of raw materials materials materials mat mat- and sharper competition from foreign producers of manufactured manufactured man man- items However the term near-term additional gains in industrial industrial industrial in in- prices which we are predicting should be more moderate moderate mod mod- moderate erate than those of 1968 What To Do DoThe DoThe The The slower slower pace pace of price inI Increases increases in in- creases will derive more from forces already in motion as a I result of past excesses in spending spending spend spend- ing Int etc than than from any massIve massive massive mass mass- ive new doses of inflationary fuel Certainly the Nixon Administration Administration Administration Ad Ad- ministration will try hard not notto notto notto to rock lock the boat Hence our hope is that the federal government government government govern govern- ment will now be more of a stabilizing influence on prices than otherwise but it is going to too be difficult to keep the lid op Those readers who own Industrial industrial In in- enterprises or are actIve active active act act- ive in Industrial management would be well wen advised to pursue pursue pursue pur pur- sue rather conservative 1 Inventory inventory tory policies on balance not because because be be- cause prices are likely to decline decline decline de de- cline soon but because the cost of carrying inventories is Ia high and still rising It just Isn't good business to buy too far ahead to beat the gun of price boosts If because if-because because of high money rates rates its its it's going to cost you more than the difference to finance and store the overlarge inventory purchase |