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almost all countries; coffee, chocolate, rice, and dairy products are usually found on the list too. The quantities included in the ration vary, as in Great Britain, according to the available supplies. Favorable crops in 1946 made it possible to increase rations in most parts of Europe. The size of the ration has been greater in some places than in others. In Italy, where the food situation has been particularly unfavorable, an average of 724 calories was supplied daily to normal consumers in eight large cities during the first half of 1946. In France, on the other hand, official rations of meat, milk, sugar, bread, and other items were approximately 1,300 to 1,400 calories per day in the third quarter of 1946.

Various attempts to control prices in Latin America have been largely ineffective. Price ceilings, rent control, Government requisitioning and distribution of supplies, and profit restrictions are among the devices that have been provided by legislation or decrees.

Statistics of Prices

A WARNING NOTE ON THE USE OF PRICE INDEXES

The following tables present official indexes of retail (cost of living) and wholesale prices in a number of countries. For reasons discussed below, many of these indexes must be regarded as conservative estimates of the increase in prices. Some of them are more accurate measures of price changes than others; and without specific knowledge of the degree of reliability of each index, comparisons between the extent of price changes in various countries should not be made except to obtain rough approximations of the relative price movements.

In the very nature of the changes they are designed to measure, price indexes perform least satisfactorily in times of significant variations in the patterns of production and consumption, as in a war period or in the present postwar era. Yet these are the times when labor, business, and government agencies would like to lean most heavily on such indexes for guidance in policy formulation. The cost-of-living type of price index is devised to measure variations in the cost of a fixed basket of the more important goods and services purchased by families of urban wage earners. Some of them reflect in their weighting patterns changes in family expenditures, which may be caused by alterations in the composition of the basket purchased as well as in prices; most of them do not.

During periods of change in the nature of production and consumption, price indexes may not reflect price movements accurately because of the difficulty of comparing the usefulness of new goods with that of goods formerly produced and consumed, and in addition there may be and frequently are important changes in the quality of the goods available for pricing from time to time. In periods when

governments have fixed ceiling prices, some goods are always sold above the ceilings in regular markets and some in hide-away and flyby-night markets. Many official statistical agencies take the position that the prices used in computing official price indexes should cover, in the proper proportions, not only ceiling prices but also above-ceiling prices charged in regular markets but not prices in irregular channels. This is the practice of the United States Bureau of Labor Statistics. Other official statistical agencies use only ceiling prices in index computation. Explanations of the pricing procedures used are not available for the indexes of many foreign countries and this lack is a great handicap in the interpretation of the figures.

Where black markets are very widely patronized and where the discrepancy between official and free prices is very great, price indexes may grossly understate the increase in the prices actually paid by most purchasers of goods. For example, a report comparing ceiling prices with actual prices in 11 representative markets in one Latin American city showed that actual prices of certain staples ranged from 129 to 200 percent of ceiling prices.

Understatement of the actual extent of price increases may result also as a byproduct of the use of subsidies. Subsidies-which provided producers with incentives to maintain or increase output without making price increases necessary-have been applied to consumer goods as a means of circumventing the disastrous wage-price spiral. However, in some countries where wages have been tied to the cost of living, subsidies have sometimes been used to keep the cost-of-living inder from rising but not the total cost of living to the average consumer. This is possible because cost-of-living indexes, in the interest of economy, are almost always based on the price movements of a smaller number of goods than wage earners actually buy. Since in normal times the prices of closely related commodities move together, price changes for an entire group of products are indicated by the price movements of one or two typical items. When the particular commodities priced for the index are selected for subsidization, however, a downward bias is immediately introduced.

An example of the effect of subsidies in contributing to the understatement of price increases may be found in the British cost-of-living index. Many important items in the index-which is based on a 1914 worker's budget and does not allow for subsequent changes in consumption habits-are subsidized. Thus, although the cost-ofliving index stood at 31 percent above the prewar level early last summer, it was recognized in an official publication that the actual increase in consumers' prices was closer to 50 percent.

* British Information Services: Labor and Industry, in Britain, June 1946 (p. 93).

Despite these difficulties, the price indexes are presented in the following pages because they represent the best data that are available on the movement of prices. By regarding them as minimum estimates of the extent of price rises, serious errors in interpretation will be avoided.

RETAIL PRICE INDEXES

Most of these indexes show changes in retail prices of commodities, rents, and services in cities. Footnotes indicate those with more restricted coverage.

TABLE 1.-Indexes of retail prices (living costs) in American republics, August 1939– November 1946

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The "consumers' price index for moderate-income families in large cities," formerly known as the "cost of living index," measures average changes in retail prices of selected goods, rents, and services, weighted by quantities bought by families of wage earners and moderate-income workers in large cities in 1934-36. The items priced for the index constituted about 70 percent of the expenditures of city families whose income averaged $1,524 in 1934-36. The index only partially shows the wartime effects of changes in quality, availability of consumer goods, etc. The President's Committee on the Cost of Living has estimated that such factors, together with certain others not fully measured by the index, would add a maximum of 3 to 4 pointsto the index for large cities between January 1941 and September 1944. If account is taken of continued deterioration of quality and disappearance of low-priced merchandise between September 1944 and September 1945, which was estimated at an additional 1⁄2 point, the total large-city adjustment would be 4.5 points. If small cities were included in the national average, another point would be added, making the total approximately 5 points.

Index does not include rent.

Not available.

4 August.

Primary data not available; calculated from secondary source.

TABLE 2.-Indexes of retail prices (living costs) in countries of the British Commonwealth, August 1939-November 1946

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TABLE 3.-Indexes of retail prices (living costs) in countries of Europe and the Middle

East, August 1939-November 1946

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TABLE 3.-Indexes of retail prices (living costs) in countries of Europe and the Middle East, August 1939-November 1946-Continued

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The wholesale price indexes are based on prices paid for goods sold in primary markets, weighted in accordance with their relative importance in the countries concerned. The number and kind of items covered, the method of collecting prices, and the method of computing the indexes differ from country to country.

TABLE 4.-Indexes of wholesale prices in American republics, August 1939-November

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