Value of $100 in 1918, adjusted to 1929

What happened to prices between 1918 and 1929

Between 1918 and 1929, the Consumer Price Index went from 15.1 to 17.1. Cumulatively, prices increased 13.2%, which works out to an average of 1.14% per year. Put differently, a dollar in 1918 bought what $0.88 buys in 1929.

1918 brought the steepest annual price increase the CPI had recorded: consumer prices rose 18.0% for the year, edging out 1917’s already sharp 17.4% as the economy stayed at full wartime mobilization for most of the year. A first-class stamp cost 3 cents, up from 2 cents the previous November under the War Revenue Act’s wartime tax increases. The war itself ended on November 11, when Germany signed an armistice with the Allied powers after more than four years of fighting in Europe, but the inflation built up over a year and a half of mobilization did not disappear along with the fighting. The bigger public health story that year was the influenza pandemic that reached the U.S. in a mild spring wave and then returned that fall in a far deadlier form, eventually killing roughly 675,000 Americans, more than the country’s combat losses in the war. It hit factories, docks, and shops alongside households, adding disruption to an economy already strained by wartime demand. Prices would keep climbing even after the armistice, into the postwar surge of 1919.

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The destination year: 1929

Consumer prices were unchanged in 1929, the CPI’s annual average flat for the second time in six years and a fitting close to a decade that began with wartime inflation and ended in rough price stability. By year’s end the index stood 14.5% below its 1920 peak and roughly 73% above its 1913 starting point, a reminder that even a “stable” decade left prices well above where they had started. The stability in the cost of living masked what was building in financial markets. The National Bureau of Economic Research dates the start of the Great Depression to that August, the month the business cycle peaked, months before most Americans noticed anything was wrong. The break came that October: panic selling hit Wall Street on Black Thursday, October 24, and returned even worse on Black Tuesday, October 29, when the Dow Jones Industrial Average fell about 12% in a single session. Billions of dollars in paper wealth disappeared within days, and the crash marked the start of a downturn that would pull consumer prices into their steepest sustained decline of the 20th century over the next four years. First-class postage was still 2 cents, a price that would hold until 1932.

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