Value of $100 in 1931, adjusted to 1956

What happened to prices between 1931 and 1956

Between 1931 and 1956, the Consumer Price Index went from 15.2 to 27.2. Cumulatively, prices increased 78.9%, which works out to an average of 2.35% per year. Put differently, a dollar in 1931 bought what $0.56 buys in 1956.

Consumer prices fell 9.0% in 1931, a sharp acceleration from the 2.3% decline in 1930, as falling wages, collapsing farm prices, and a fresh wave of bank failures fed a downward spiral that the still-contracting economy could not shake. More than 2,000 banks failed during the year, far more than in 1930, as depositors who had watched earlier banks go under pulled their cash out of ones they feared were next. The crisis went international that September, when Britain suspended the gold standard amid a run on sterling. The Federal Reserve’s response made the domestic downturn worse before it made anything better: to defend the dollar’s own gold backing, the Fed raised its discount rate sharply that October, in two steps from 1.5% to 3.5%, tightening credit at the exact moment the economy needed the opposite. Not every headline that year was grim. The Empire State Building opened its doors on May 1, briefly the tallest building in the world, though so much of Manhattan’s office space sat vacant amid the Depression that tenants stayed scarce and New Yorkers took to calling it the “Empty State Building.” Consumer prices had now fallen for two straight years and stood 53.5% above their 1913 level, down from the 68.7% margin of just twelve months before. First-class postage remained at 2 cents.

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The destination year: 1956

Consumer prices rose 1.5% in 1956, a return to mild inflation after they had fallen 0.4% in 1955, the only annual decline of the decade. The two years sat in the calmest stretch of the postwar index, a lull between the Korean War price surge earlier in the 1950s and the acceleration that would return in the 1970s. Congress had already raised the wage floor into that calm: the Fair Labor Standards Amendments of 1955, signed the previous August, took effect March 1 and lifted the federal minimum wage from 75 cents to $1 an hour, the first increase since 1950. Eisenhower signed a longer-lasting commitment on June 29, the Federal-Aid Highway Act, funding 41,000 miles of controlled-access highway at 90% federal cost to build the Interstate System, the largest public-works program the country had undertaken. He won a second term that November, carrying 41 states and about 57% of the popular vote in a rematch against Adlai Stevenson. Abroad, the Suez Crisis broke the calm on the supply side: Egypt nationalized the canal on July 26, and after Israel invaded the Sinai on October 29 with British and French forces following, the canal’s closure and damaged pipelines squeezed oil shipments to Western Europe for months. Consumer prices stood 174.7% above their 1913 level by 1956, up 94% since 1940 alone, even after a decade that had barely moved the index. First-class postage held at 3 cents, unchanged since 1932.

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