Statistics of Prices

After the armistice prices fell slowly for five months, during the season in which in previous years the increase had been spe cially rapid, but expectations of a permanent fall were not real ized ; in the year beginning April 1919, the index rose from 224 to 323, or 44%. The reaction began in the early summer of 192o, and the fall was very rapid in the following winter and continued till the end of 1921, when prices were 6o% above the pre-war level, and only half those at the maximum of April 192o by the Statist account. During the subsequent four years the move ment was relatively slight, but there was a definite fall and rise in the middle of 1923, and a further rise in the latter part of 1924. The gold basis was restored in May 1925, and both in anticipation of this and after it there was a fall amounting to io% in the whole year, till prices were 58% above 1913 ; equi librium with the United States price index was reached in the latter part of 1925. In 1926 and 1927 the tendency was down wards, and in the winter 1927-28 prices were less than 5o% higher than at the outbreak of war.

B. Other Countries.

The world movement of prices is best indicated by the United States index number, since in that country alone the gold basis has been maintained throughout the period 1913 to 1925. In the United States prices rose rapidly, from the year 1916 to a maximum in 192o—in April the index was 273— and then fell rapidly till the spring of 1921 ; after slight variations, there was a rise from June 1924 to Feb. 1925, and during the sub sequent six months the number remained close to 16o. The index then fell till April 1927 (144) and rose to 149 in the winter of 1927-28. In all the countries included in Table V. there was a rise from 1915 to 192o, greater or smaller according to the amount of paper money issued. In Germany and Austria the increase was so great that the numbers reached were almost incredible. After 1920 there was a fall in all the index numbers in the table ; by the end of 1925 Canada, Australia, South Africa, Sweden, the Netherlands, Switzerland and Germany had returned to the gold basis, and in Canada and Europe there was a close approximation to the Amer ican index. There was a general slight fall in 1926-27. In Belgium, France and Italy depreciation recommenced in 1922, and in France and Italy prices had in 1925 passed the 192o average. In 1926 Belgium reconstituted her currency, and in 1927 Italy and in 1928 France stabilized the exchange of lire and francs respectively. At the end of 1925 Japan was taking steps to stabilize her currency.

C. Selected Commodities.

When commodities are taken separately, the measurements can be made more exactly, subject to the two following qualifications : (I) during the war period the ordinary sources of supply were so disturbed that pre-war kinds and qualities were no longer in the market (in the Economist index number 25 out of the 44 quotations included were subject to some modification of quality) ; and (2) a statement of prices is generally taken as meaning the price at which a purchaser can obtain the goods he desires, and at which a merchant is willing to sell, but in the time of control and rationing these conditions did not obtain, and the price was fixed by other conditions than those which influence a free market.

Table VI. is based on the prices tabulated annually, in the Journal of the Royal Statistical Society, by the editor of the Statist. The index numbers have been recast, the average price in 1913 being taken as zoo for each commodity; the totals have been obtained by grouping together the separate entries on the same plan as in the original, but the change in the base year affects the results, which thus differ from those given in Table IV. in the same way as if the weights had been changed.

It is at once evident that the various prices have not followed the same course; the extremes in 1920 were house coal, whose price rose only 49% in seven years, and Java sugar, where the price is 587%. This wide divergence of itself shows that the general index number cannot have great precision. The prices as recorded are the resultants of at least five forces, viz., the general inflation of prices, the conditions of supply and demand for the separate commodities, the control of supply, the control of prices, the change of quality. In 1915-16 the principal increases may be traced to the diminution or difficulty of supply (cereals, sugar, flax), to acuteness of demand (wool) or to both (timber). In 1917-18 the prices of nearly all commodities whose supply was threatened or for which the demand was increased were con trolled. The quality was changed directly in the case of flour, and indirectly when the prices were averages of several grades, as in the cases of meat, flax, leather and timber.

Food.—The price of wheat rose immediately after the begin ning of the war, and with it the prices of flour, oats, maize and rice. In Great Britain the prices were checked by the establish ment of a Government system of purchase at the end of 1916 and by the control of the prices of home-grown cereals, in 1917 ; with this system, flour of mixed materials was substituted for wheat flour and the product sold at a price kept constant and relatively low by the help of a subsidy, beginning in the autumn of 1917. In the case of wheat and flour the subsidy and control continued till the beginning of 1921, but the prices rose; the prices of other cereals increased very rapidly from the autumn of 1919. An attempt was made to control the consumption of oats in 1917-18, otherwise cereals were not rationed. The wholesale price of potatoes was fixed from time to time, the Government undertaking to make good growers' losses, but the price was changed so fre quently that the control had little effect. After the general fall of prices in 1920-21, the fluctuations were principally due to rather abnormal harvest vicissitudes.