Prices of Raw Materials in the 1953-54 U.S. Recession

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URING THE 1953-54 RECESSION, U.S. industrial production declined by about 10 per cent from the peak it had reached in the second quarter of 1953; but while the volume of total imports declined at roughly the same rate, wholesale prices as well as import prices (average values) advanced slightly.1 The decline in the volume of imports was well in line with the developments that are usual when U.S. business activity slackens; there had been similar movements in previous recessions. But the failure of prices to decline was in sharp contrast to their customary behavior. As shown in Table 1, the decline in the volume of manufacturing production and of imports in the 1953-54 recession was roughly the same as in 1948-49, and much less severe than in 1937-38. Whereas the 1937-38 downturn affected imports in all major commodity groups, the decline in the volume of imports in the two postwar recessions was concentrated largely in raw materials; food imports do not appear to have been affected, and imports of manufactured goods declined only slightly. The behavior of prices, however, differed sharply from that in 1937-38 and in 1948-49, and indeed from the customary pattern observed in most U.S. recessions. The U.S. wholesale price index and the unit value of imports advanced slightly, in contrast to the declines of 1937-38 and 1948-49. The rise in the over-all level of import prices, and to some extent also in wholesale prices, is partly accounted for by the sharp advance in coffee prices.2 There were also some price increases in various groups of manufactured goods which, as a rule, are less sensitive than primary products to fluctuations in demand. The main divergence from the customary behavior of prices was in the comparative stability of the prices of industrial raw materials: the market price index (for sensitive commodities) declined no more than 5 per cent, compared with a