Value of $100 in 1918, adjusted to 1937

What happened to prices between 1918 and 1937

Between 1918 and 1937, the Consumer Price Index went from 15.1 to 14.4. Cumulatively, prices declined 4.6%, which works out to an average of -0.25% per year. Put differently, a dollar in 1918 bought what $1.05 buys in 1937.

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: 1937

Consumer prices rose 3.6% in 1937, the fastest pace since before the Depression and the fourth straight year of gains, leaving prices 10.8% above their 1933 trough though still 15.8% below the 1929 peak. The recovery did not last the year. The National Bureau of Economic Research dates a new business cycle peak to that May, the start of what became known as the Recession of 1937-38. Policy tightened on two fronts at once: the Federal Reserve had doubled bank reserve requirements over the preceding year to head off inflation it worried was building, and the federal government pulled back its own spending even as new Social Security payroll taxes began draining money from paychecks months before the first benefit checks went out. Together they choked off a recovery that had not yet reached its pre-Depression footing. Not every milestone that year was economic. The Golden Gate Bridge opened to traffic on May 27 after four years of construction, at the time the longest suspension bridge span in the world, a rare bright spot in a year that would end with the economy sliding backward again. First-class postage held at 3 cents.

More about inflation in 1937 →