ECONOMIC

TABLE 26.—Behavior of items in consumer price index during Phases II and HI, classified bytype of control applicableRelative importance,December (percentof all items)Percent change,annual rates 1Percent contributionto changeItem and control status1971 1972Phase WNov. 1971toJan. 1973Phase IIIJan. 1973toJune 1973Phase IINov. 1971toJan. 1973Phase IIIJan.1973toJune 1973All items100.0100.03.68.3100100A. Items exempt from Phases II and III 211.311.54.45.5137B. Items subject to similar regulations in PhasesII and III:FoodPublic utilities aMedical care servicesMortgage interest rates22.24.85.63.722.54.85.63.76.54.23.920.32.83.81.83856-1C. Items for which Phase II controls abolishedor made self-administered: *Residential rentsNonfood commoditiesServices5.132.215.25.131.815.13.82.13.34.46.16.25112132213Total A+BTotal CAddendum: C excluding gasoline, motor andfuel oil, and coal47.652.448.848.151.948.44.82.62.611.76.05.16337301 Seasonally adjusted where possible. Major exceptions are property taxes, services, and residential rents.2 Major items are houses, used cars, and State and local taxes and user charges.3 Though the Phase II requirement for certification was dropped in Phase III, the basic regulations continued in force.* Excludes components included in A and B above and does not take into account the small business exemption.Note.—Detail may not add to total because of rounding.Sources: Department of Labor (Bureau of Labor Statistics) and Council of Economic Advisers.greater for the first two categories, for which the rules did not change, thanfor the third category, for which the rules were relaxed. Consequently thefirst two categories contributed a little more to the inflation of Phase IIIthan they did to the inflation of Phase II. Thus, little evidence can be foundthat consumer prices rose exceptionally fast in the areas in which the administrationof controls was relaxed in Phase III.This is also largely the case even with respect to the rapid increases inthe WPI. Agricultural prices were not controlled under Phase II, so the shiftto Phase III presumably had no effect on them. Much of the increase inprices of raw industrial commodities occurred in industries which had profitmargins below their permitted ceilings and, in some important instances,those whose product prices at the beginning of 1973 were below Phase IIceilings. There was considerable room for profit margin expansion in industrieslike steel, primary nonferrous metals, and petroleum. Only a tighteningof Phase II rules could have eliminated this gap; but, given worldwidedemand and the devaluation of the dollar, such tightening might only haveled to a further expansion of exports.* * * * * * *During 1973, in all phases of the controls, there was a marked shift ofrelative prices. Prices of raw agricultural products and of industrial materialsrose very much more than prices of finished goods and services.Undoubtedly this shift would have happened in 1973 without a controls104