Value of $100 in 1929, adjusted to 1940

What happened to prices between 1929 and 1940

Between 1929 and 1940, the Consumer Price Index went from 17.1 to 14. Cumulatively, prices declined 18.1%, which works out to an average of -1.80% per year. Put differently, a dollar in 1929 bought what $1.22 buys in 1940.

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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The destination year: 1940

Consumer prices rose 0.7% in 1940, snapping 1939’s decline and marking the first increase since 1937. The gain was modest, and the CPI still stood 18.1% below its 1929 peak, a reminder of how far the recovery from the Depression’s trough had left to go even as defense orders from Britain and France began reaching American factories. War was already reshaping domestic policy well before it touched American soil. Congress passed the Selective Training and Service Act that September, the country’s first peacetime draft, requiring men aged 21 to 35 to register and authorizing the induction of up to 900,000 men a year, more than a year before Pearl Harbor. That November, Franklin Roosevelt won an unprecedented third term, defeating Republican Wendell Willkie after campaigning on keeping the United States out of the war then consuming Europe and Asia. The promise would not hold much longer: within two years, wartime demand would push consumer prices up faster than at any point since the aftermath of World War I. First-class postage held at 3 cents, and the federal minimum wage stayed at 30 cents an hour, the level set the previous October under the Fair Labor Standards Act.

More about inflation in 1940 →