Buying Power under the Recovery Program

Report Outline
The Central Question of Prices and Purchasing Power
Divergent Elements of Recovery Program
Progress in Industry Under Recovery Program
Progress in Agriculture Under Recovery Program
Changes in Workers' and Farmers' Buying Power
Problems and Tendencies of Recovery Program
Special Focus

The Central Question of Prices and Purchasing Power

The Farmer's Revolt against the N. R. A., the new gold purchasing plan and the pressure for inflation, the Buy Now campaign, the administration's credit program, and the re-doubled efforts to speed up construction and increase employment in heavy industry all emphasize the extreme importance of consumers' buying power to the success of the recovery program. There has been a marked falling off in production and business activity since July, coinciding with rapidly rising retail prices and a drop in prices received by farmers for their products. The inferences to be drawn from these facts appear to be that prices are overtaking, or already have overtaken, the increase of buying funds in the hands of consumers, and that a recession in the demand for goods will be the result. This belief is supported by the available statistics on sales. The public is not buying as much as it did during the summer months—in fact it is not buying as much as it did at this time last year.

The Federal Reserve Board reports that retail sales in September were only two per cent greater in value than those in September, 1932. Retail prices, however, were approximately 17 per cent higher, so that actual quantity sales of goods were probably some 13 per cent smaller than a year before. Whatever the cause of such a decided slump in the demand for goods, continuation of the downward trend in sales must mean the defeat of the recovery program. When goods are not sold over the counter, replacement orders cannot be given, factories must slow up, the railroads carry less freight, and men and women are thrown out of work all along the line; shrinking pay rolls result in lessened buying power, ever smaller sales, and again the spiral of deepening depression is experienced.

The Central Question of Prices and Purchasing Power

Due to the increase in prices, the person who is now receiving the same income he did five or six months ago finds that it will go less than four-fifths as far in his purchasing. It is true that some 3,500,000 workers have been re-employed and now have funds with which to buy, that weekly earnings of others have risen, and that in general the purchasing power of the farmer's income has improved over last year. In other words, there has been a re-distribution of income along the lines contemplated by the administration, favoring some of the least fortunate groups in the population. But the vital question from the standpoint of national recovery is whether the total buying power of the population has been raised; whether the aggregate income of consumers has increased more rapidly than prices.