Other formats

    TEI XML file   ePub eBook file  


    mail icontwitter iconBlogspot iconrss icon

War Economy

The Wartime Prices Index as a Measure of Price Change

The Wartime Prices Index as a Measure of Price Change

Reference has been made to the fact that the items included in the Wartime Prices Index became price stabilised items. In some cases stabilisation extended beyond the ranges of items included in the index, but, for most commodity or service groups, the two lists of items were identical. This concentration of stabilisation on the index items tended to make the index unrepresentative, and page 333 would not have been acceptable to a statistician in normal circumstances. Its acceptance in time of war has been discussed briefly on pages 31214. The fact that the Wartime Prices Index contained more items than the previous Retail Prices Index did tend to reduce the likelihood of its becoming unrepresentative, and no doubt helped to secure its acceptance.

Though the Government Statistician did not publish the old Retail Prices Index after the December 1942 figure, the calculation of the index was continued and gives some measure of the downward bias introduced into the Wartime Prices Index.

  Wartime Prices Index Retail Prices Index 1926–30 Converted to Base December 1942 = 1000
December 1000 1000
March 1011 990
June 1000 994
September 996 1007
December 1001 1016
March 1005 1010
June 1001 1013
September 1003 1024
December 1004 1034
March 1006 1025
June 1005 1029
September 1001 1036
December 1003 1042
March 1009 1036
June 1007 1039
September 1007 1048
December 1008 1047

In the September 1945 quarter the Wartime Prices Index was only 0·1 per cent above its December 1942 level. On the other hand, the Retail Prices Index, had it been available, would have shown an upward movement of 3·6 per cent over the same period. Even the Retail Prices Index probably slightly underestimated the rise in consumer prices. A substantial proportion of the items in it were also in the Wartime Prices Index, and were therefore stabilised. The price change shown by the Retail Prices Index may not, however, be very far from the truth. The purchases of the average consumer included a proportion of items whose prices were page 334 not stabilised, but so did the Retail Prices Index. If the two proportions of unstabilised items were not too different, the Retail Prices Index would still have been a reasonable measure, even though prices of the unstabilised items no doubt tended to increase faster than those of stabilised items.

While an honest endeavour was made, as part of the stabilisation scheme, to ensure a steady supply of the stabilised items, there were occasional breaks in supply. There were also cases where the controlled prices fixed by the Price Tribunal were taken into the index from the Tribunal's schedules, with no inspection to see what prices were actually being charged or whether the price controlled items were actually available. This may or may not have resulted in understatements of actual price changes, but it is certainly a practice which a statistician regards with considerable suspicion.1

Price control, while it helped to arrest price-wage and other spirals, could do nothing to contain the growing surplus of purchasing power, as goods and services became scarce. Restraint of price rises in some items therefore tended to leave an even greater excess of purchasing power for spending on other items. However, the prudent consumer was reluctant to spend money on items whose prices had risen too high, and preferred to save until goods and services were more plentiful. Small savings averaged well over £25 million a year in the second half of the war.

Attempts by the Government to reduce disposable income by taxation and borrowing also discouraged expenditure and tended to encourage care and patience among consumers. For those consumers who bought with a restraint fitting to the state of national emergency, the Wartime Prices Index was not an unrealistic measure.

Even taking the evidence of the Retail Prices Index, the period December 1942 to September 1945 was one of remarkable price stability for a belligerent country.

1 Correct procedure (as used for the Consumers' Price Index) is for field staff to record the prices at which goods are actually being purchased.