Evening star., 1942-05-03
Retailers Fear
Losses Under
Price Freezing
Business LuII Marks
End of Old Flexible
Trade System
Special Dispatch to The Star,

NEW YORK, May 2.-Business
entered a new era this week, SAYS
Business Week in its analysis of this
outlook today. When Leon Hender-
son formally announced price cell
ings on a multitude Of goods, serv-
ices and rents, an economic revolu-
ton took place, the magazine states.
The price system gave way to
Government regulation of produc-
ton (through w. P. b. and dis
tribution Through o. P. Al. No
longer can prices respond to the
play Of supply and demand. They
are f1xed-at the highest levels Of
March-effective for retailers on
May 18, and for manufacturers and
wholesalers on May IL.
The immediate effect of the
freeze" was to bring businessmen
TO sudden stop, for breath-catching
and stock taking. 1t was like the
bank holiday, back in March. 1888,
when people wondered what life
would be like without checking &C
counts. This week, businessmen
wondered how they could carry on
without flexible price system.
Store Executives Worried.
Retailers. particularly. were dis
turbed. This was reflected in ci-
william goods markets: Both manu-
facturerS and wholesalers received
cancellations or holdups on orders;
home offices wired department store
buyers to defer commitments.
The reason is fairly clear. Since
September, 1899, retail prices have
Jagged behind manufacturers and
wholesalers quotations. This Is
customary. Merchandisers habitu-
ally price-mark goods for current
sale on the basis of previously pur-
chased inventories. And gradually
retail prices make up any lag.
But now, with all prices simul-
taneously frozen, retailers are
squeezed. They must replace mer-
chandise at March prices. but they
will be selling them at prices arrived
at several months before on the
basis Of low-cost inventories. Hence
they won't collect their normal
markups.
In Canada in many cases of this
type the administration has rolled
back" wholesalers and manufac-
turers' prices. o. P. A., however,
has indicated that 1t will use the
"roll-back" very sparingly.
Manufacturers and wholesalers
also will be squeezed. Since March
wage rates have gone up, overtime
has increased and raw materials
quotations have advanced. But
those increased operating costs will
have to be absorbed instead of
passed on. Thus the effect Of the
Henderson order is to cut back
prices all along the line and reduce
profit margins.
Uncertain Period Ahead.
But the imposition of price CELL
ings is just the beginning Of busi-
ness troubles. Not only will profits
be foreshortened, but q vast system
of checking, inspecting and policing
Of price structures will have to be
devised, grades and standards es-
tablished, methods of figuring mark
ups on new merchandise worked out.
Indeed, businessmen can be GER
tain that o. P. A. regulations will
be issued, cancelled and reissued. It
will be N. r. A. days all over again.
All this is understandable. Ours
Is huge job. And Mr.. Henderson
and his aides will have to learn
from their own-not some other
country's - experience. Techniques
will have to be developed by trial
and error. very much as the War
Production Board learned that the
way to control critical materials was
to allocate them-not issue priorities.
Moreover, on top of price control,
sugar rationing starts this week. If
it goes over fairly well, businessmen
can conclude that other scarce con-
sumer goods soon will be rationed.
Meanwhile, this week w. p. B.
took significant step. Hereafter
war plant contracts viii be confined
so far as possible to facilities pro-
ducing basic raw materials-steel,
copper, aluminium, magnesium, etc
on the theory that such materials
are becoming the critical bottleneck
in war expansion. Conversion will
be depended on for expanding fabri-
eating capacity.
And here's an interesting fact.
For the last six weeks commercial
loans have been declining. This sig
nalizes a change in trend. What's
happened is this: Retailers. espe-
cially dealers in durable consumers
goods, have not been able to replace
stocks. So they've been paying on
debts-liquidating.