The Bureau of Labor Statistics and Stigler-Kindahl Data. Our examination of the Bureau of Labor Statistics (BLS) price ser ies for steel m...
The Bureau of Labor Statistics and Stigler-Kindahl Data. Our examination of the Bureau of Labor Statistics (BLS) price ser ies for steel mill products, finished steel products, and semi-finished steel products reveals an almost steadily nondecreasing trend. As the BLS obtains its data from list rather than from transactions pr ices, it is natural to ask whether the true prices would manifest a cyclical trend even if the BLS series does not¡ i.e., might nonreported discounts off list be more frequent dur ing the trough of the business cycle. Stigler and Kindahl (33) published what they regard as transactions pr ice indexes in major industr ies on a monthly basis for the years 1~57-66.
These indexes were computed i ¡ -171- from confidential data supplied by purchasers of the products reported. with respect to steel, they compared their aggregate index of the nine steel products in their study with the BLS index of finished steel products and found: The BLS and NB prices of steel products move together so closely that a description of one is a description of the other. The upward trends in price are essentially th~.same: .05 percent monthly (BLS) vs. .03 percent monthly (NB). Neither index displays a noticeable cyclical movement in either expansion or contraction. Nor are the short-run fluctuations of appreciable size. Figure I is a graph of the da ta discussed in the above quotation. There were two recessions in the time period covered by the Stigler-Kindahl data:
July 1957 to April 1958 and May 1960 to February 1961. The absence of noticeable cyclical movement in the steel industry surpr ised St ig ler and K indah 1. It stood in contrast to the other industries they studied; for each of the other industries, their index of transactions prices showed more cyclical behavior in prices than were exhibited by the BLS indexes. Generally, BLS indexes of steel pr ices move in the manner predicted by the administered pricing hypothesis. Critics of the hypothesis allege that actual or transactions prices differ markedly from the published or list prices that the BLS reports. Thus, if the Stigler-Kindahl data, which purport to measure actual prices and move closely and noncyclically with BLS prices, are relevant to current steel pricing, then administered pricing -172- may be a fair characterization of industry pricing policy. There is considerable evidence, however, that this is incorrect. The Stigler-Kindahl data cover the decade beginning in January 1957. In section I of this chapter, it was suggested that a change in pricing policies occurred in the steel industry around 1960. This implies that conclusions based on that part of the Stigler-Kindahl data wh~ch. is pre-1960 might not apply to current pricing practices
. There were two contractions in the per ioà covered by the Stigler-Kindahl data. The data in table 4.5 reflect a slight decline in prices in the post-1960 contr act ion wh i Ie the coun ter-cycl ical pr icing was for the pre-1960 contraction. The Steel Trade Press Data. An examination of the steel trade literature of the past 10 years reveals considerable evidence that contradicts the impression of "administered pr icing" obtained from the BLS and Stigler-Kindahl data. In early 1968, steel buyers began accumulating inventories in anticipation of the expiration of the contract between the Un i ted Steelwor ker s and the maj or steel compan ies. Despi te the hedge buying, certain areas, such as Florida and the Great Lakes region, were experiencing heavy import competition. United States Steel secretly offered to meet the low pr ices of foreign mills to certain customers on some important products including gas and water pipe, galvanized sheet
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