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Martin's policy was so bitterly opposed by such easy moneymen as Texas Democrat Wright Patman and Tennessee Democrat Estes Kefauver that Congress made halfhearted attempts to investigate the Fed. But by and large, thoughtful businessmen supported Martin and his aims, though they kept their fingers crossed. No one was quite sure that the Fed could use its credit tools delicately enough to nip the bubble on the boom without popping the boom itself. When the Fed applied one last turn of the screw in August with a ½% (to 3½%) boost in the discount rate, i.e., the rate the Fed charges member banks for loans, many businessmen thought it was too much, and said so. The inflationary pressures had already eased considerably. Finally, Martin conceded the point, dropped the rate back to 3%, as interest rates in general began to decline. Yet at year's end the ever-cautious Fed was moving very slowly to make credit more plentiful. The consumer price index, still rising, was up .4% in November, biggest rise in five months, and 1,000,000 workers will get cost-of-living pay raises of 5¢ an hour next month.
The Busy Buyers. Had FBR's Martin pinched too hard, too long? Those who looked especially at the drop in production thought so. But those who looked elsewhere suspected that many companies were being overcareful.
In 1956 businessmen were so encouraged by rising sales that they added $5.9 billion to inventories to be sure they would not be caught short of goods. In 1957 the inventory increase was sharply slowed; businessmen added only $1.9 billion. More important, that trend was reversed in the final months of the year. Industry cut production so rapidly that, instead of adding, business began to reduce inventories. This meant that the U.S. was consuming goods faster than it was ordering new supplies, even though consumers managed their purchases without going so heavily in debt as they had in the previous year. Consumer debt, which rose $3.2 billion in 1956 to $41.8 billion, increased by only $1.5 billion in 1957. The drop in inventories also demonstrated that the U.S. consumer, sometimes scared by Sputnik, often confused by the recession talk, but always well supplied with cash, was still buying almost as eagerly as ever —even if he did make a great show of economizing. Retail sales for the year were up nearly 5%, and Christmas sales, after a slow start, almost exactly matched 1956's alltime record. They came up fast in the final days: Manhattan's R. H. Macy reported the first day in department store history in which sales were substantially above $2,000,000.