Today's manufacturing report from the Philadelphia Fed was a great indication of just how quickly businesses are shifting into an inflationary mindset. Price indicators on both sides of the factory-the intake gate where the materials arrive and the offloading docks where the products ship out-jumped to 40 year highs. The prices paid diffusion index soared 8 points to 76.8, its highest reading since March 1980. Nearly 77 percent of firms reported paying higher prices and none-zero, zilch, donut-reported paying lower.
We've seen spikes in prices of materials and higher-order goods in the past, including when tariffs on metals and some Chinese imports were hiked during the Trump administration, but these typically have squeezed margins rather than raised consumer prices. This time, however, businesses are succeeding in passing on higher prices. Nearly 43 percent of the firms reported increases in prices of their own manufactured goods, the highest percentage since 1981 and a big jump up from 36 percent in April. Just two percent of firms reported falling prices.
After a long dormancy, inflation expectations have roared back to life. When the Philly Fed asked businesses in February how much they thought they would increase the prices of their goods over the next twelve months, the median answer was three percent. In May, that figure jumped all the way up to five percent. The median reported inflation over the previous 12 months was 2.3 percent (up from 2.0 percent in February), which indicates that businesses think inflation is running twice as hot.
You won't be surprised that business owners suspect that they'll be able to raise prices more than the other guys. That's the kind of animal spirit that drives American capitalism. So the Philly Fed found that the median expectation for broader inflation went from 3 percent in February to 4 percent in May, half the gain that the same folks said about their own prices.
As far as we can tell, we and the Wall Street Journal's editorial page writer James Freeman were the only ones to highlight the inflationary signals in the Philadelphia Fed report. After decades of low inflation, many journalists and analysts just aren't equipped to notice rising prices even when they heat up to temperatures unseen since the days of Jimmy Carter and Paul Volcker.
- Alex Marlow & John Carney
Breitbart News Network
This year has proven to be no less challenging than 2020 for businesses and customers alike. Supply chain disruptions across the globe continue to rile the manufacturing and transportation of goods in every industry. These disruptions have caused record backorders on everything from children's toys to appliances to woodworking and metalworking machinery. There is no industry untouched by these disruptions.
The unprecedented demand for goods, coupled with the restricted supply chain over the last fifteen months has not only impacted supply speed, but now rapid increases in raw material costs and transportation expenses are causing financial impacts in every aspect of business. The price of steel is up over 30%, copper 35% and the cost of shipping has quadrupled; just about every other cost for producing and moving goods continues to rise with no signs of slowing.
Grizzly has absorbed these cost increases on most goods for as long as possible, but we can no longer hold off on increasing our prices. In some cases, these increases are significant, but I can assure you we have done everything in our power to minimize increases wherever possible before passing additional costs on to the customer.
We are committed to providing a product you can trust by supplying high-quality tools at affordable prices with outstanding customer service. We will continue to work tirelessly to increase supply and minimize cost impacts wherever we can.
Thank you for your business and ongoing support.
Best Regards,
Robert McCoy
President
Grizzly Industrial, Inc.
In the crazy last 100 days, the price of everything from lumber, food and gas to cars and houses has soared. Yet many interest rates are still stuck at or below 3%.
And then there's lumber. Have you noticed lumber? Since last year, the price of dimensional lumber has gone up by almost 300%. Want a thousand board feet? That'll be $1,359. That price has never been higher. According to the National Association of Home Builders, the cost of materials adds more than $35,000 extra dollars to the price of a new single-family home.
The consumer price index spiked 0.6% in March, the largest monthly increase in nearly a decade, the Labor Department reported last month. In particular, the costs of
lumber, gasoline, steel, copper, computer chips, homes and home appliances have all substantially increased in the past few months.
"We are seeing very substantial inflation," Warren Buffett, billionaire investor and chairman of Berkshire Hathaway, said at his company's annual shareholder meeting Saturday, according to CNBC. "It's very interesting. We are raising prices."
"The costs are just up, up, up," he continued. "Steel costs, you know, just every day they're going up."
Lumber prices hit an all-time record price of $1,500.50 per thousand board feet on Friday, according to The Wall Street Journal. The high cost of wood is expected to stay elevated for several months.
The
high cost of wood has contributed to the rising cost of homes nationwide. Home prices rose 11.3% in March, the largest increase since 2006, real estate insights firm CoreLogic reported Tuesday.
Buffett noted that the cost of building homes is increasing due to
lumber* and steel price increases, CNBC reported. Berkshire Hathaway owns Clayton Homes, one of the largest homebuilding companies in the U.S, paint maker Benjamin Moore and carpet manufacturer Shaw Industries.
"Homebuyers are experiencing the most competitive housing market we've seen since the Great Recession," Frank Martell, president and CEO of CoreLogic, said in a statement last month. "Rising mortgage rates and severe supply constraints are pushing already-overheated home prices out of reach for some prospective buyers."
CD rates go up during inflation. If you've got no big ticket items to buy then it can work out… If you've got CD's that is.
Around 1980, CD rates were 11%. Jimmy Carter years, very high inflation. I built my house then. It wasn't that materials were expensive, it's just that since no one was building there were no materials in stock. I waited for about 3 weeks for a stack of sheetrock for instance. But it was a good time to build. I put the shell up myself one summer and got it enclosed and it was probably about 40% less than a few months previous.
So with inflation, eventually people will slow spending and stuff will drop. It's all about what the market will bear. Capitalism in motion. Under this system you gotta take the good with the bad. Still better than other methods for sure.
As per the Federal Reserve chair, this inflation trend is "transitory", which the market in general is in agreement with him. I keep a very close eye on the mortgage back securities (it is my job as a mortgage originator) which dictate the mortgage rates and I can tell you the rates are stable.
Yes, inflation is up and yes rates will eventually will rise, but the Federal Reserve is buying approximately $120B monthly mortgage back securities in order to keep the rates low and there is no indication they will taper anytime this year.
Also, this inflation trend is somewhat skewed since the some commodities have increased in value from 2020 where they were artificially low. As as example, crude hit $28 a barrel in 2020 and now at $64 a barrel. It is almost triple, but $28 a barrel was artificially low due to oversupply and was around $70 a barrel in 2019. So it looks like it tripled in price, but actually just stabilized to pre COVID pricing.
I bought my first home at 14% rate and I can tell you, we will not see this again in my lifetime. When the market was at its hottest point in 2004, 2005, 2006 the rates were hovering in the 5's to 7's.
This current inflation environment is indeed transitory.
Does the current issue with logistics supply chain attribute to some of the inflation? I used to work for an intermodal trucking company and still have some friends in that sector. They are telling me trucks, ships, trains, etc are all running extra empty routes to go collect chassis and containers that were just left at wherever their last stop was when COVID lockdowns were enforced. I know "running empty" in the shipping sector is always a bad thing as you burn fuel and man hours for no gain. Those additional costs get pushed off to your client which I assume leads to eventual higher costs for consumers. Not to mention logistics constraints leads to the supply and demand curve getting thrown off.
Fed policy since GFC hasn't changed. They seek to temporarily inflate the perceived value of paper assets. Stocks, bonds, mortgage's, commodities. Money printing. They can't stop or unwind their balance sheet or all explodes in their face.
Fed chairs and economists speak to inflation via the cost of Peruvian anchovies affected by El Nino and trading down from rib eyes to ground beef, so there is no inflation, food prices are actually cheaper
Yes, shipping costs have gone up dramatically both domestically and internationally due to COVID and the supply chain shutting down. Demand for shipping has never seen such an increase since we have never been locked down at home like we were during the pandemic. Things are opening up, people are moving about and this will drive the cost of shipping down as demand for shipping basic essentials will slow.
The Federal Reserve is an interesting organization; it is assumed it's a federal agency, but it is actually a private entity owned by BIG banks with broad financial powers. They print the money, create the T-bills and then buy them back with the money they just printed. My feelings about the Federal Reserve and how they control and manipulate the economy is a discussion for another day.
My attempt to understand what the hell is going on has lead me to watch old videos of Milton Friedman.
What we have here is the fourth way to spend your money. And it's the worst possible way the government takes your money and gives to someone else.
Or use it to grow government programs. He also mentions once inflation gets started its very hard to stop.
TSC has never had much stock in stores near me. They all closed years back, and now are attempting to open new stores. The big box Menards, Lowe's, and Depot all have full stock.
TSC has never had much stock in stores near me. They all closed years back, and now are attempting to open new stores. The big box Menards, Lowe s, and Depot all have full stock.
Our store in almost always empty and having 10 cars in the parking lot is the equivalent of Mother's day at the florist.
They really didn't try to change with the times and agricultural & livestock supplies, tools, workwear & boots geared towards that crowd just doesn't cut it anymore in many areas of the country. Rural King really took many of their remaining group of limited shoppers, in my area, as they can eat free pop corn and look at guns. Prices weren't all that competitive either the several times I stopped in.
We have a Tractor Supply about 8 miles from us, and even though I live on a few acres, there aren't enough "Tractors" near here to make a difference. Still that store is packed all the time, often times more in TS than in Lowes anymore. I can hardly understand how they are holding on, Menards has waxed their behinds. Home Cheapo seems to have a "base" pretty steady, but not overwhelming. If I was to guess I would see Menards taking 11% to world domination.
Rural King is newer here, and they evidently haven't caught on.
Just another of many cases of it's always sunny somewhere for someone.
In 1980 when we got married, the best we could find was 22.5% in a fixed. They had started those ARM's about then, and some who hung onto them wished they hadn't. 15 to 18% jumped to 29%, was like having a credit card on a home loan.
We jumped out of that "home loan" thing as soon as we could. Saying you are a home owner, and having nothing to do with a bank is quite refreshing. Living the dream…..
Menards is my choice. Decent quality and selection. Also usually the lowest prices. And much more help than Lowe's and Depot, both of seem to be terribly understaffed. I shop Depot for Milwaukee tools, and Lowe's has the Craftsman warranty for most of my old tools. So we need them all.
When I bought my first home I locked in at 15% and it went on to 20% later. Still in the same home but it is at zero percent now.
- controlfreak
In 1980 when we got married, the best we could find was 22.5% in a fixed. They had started those ARM s about then, and some who hung onto them wished they hadn t. 15 to 18% jumped to 29%, was like having a credit card on a home loan.
We jumped out of that "home loan" thing as soon as we could. Saying you are a home owner, and having nothing to do with a bank is quite refreshing. Living the dream…..
The good thing about those days was savings accounts paid like 6-7% interest. You could save money in a savings account, rent an apartment and retire on interest. Nowadays there is no incentive to save one penny.
good thing about those days was savings accounts paid like 6-7% interest. You could save money in a savings account, rent an apartment and retire on interest. Nowadays there is no incentive to save one penny.
Maybe so but even with low interest rates i find myself paying cash for everything. If it all hits the fan, I don't need to sweat the payments. But yes, where can I grow savings? Very difficult times.
I find it funny that some want to blame the current administration but as with most of our current problems, they were actually created by the previous administration.
Perhaps if 45 hadnt tried to start a trade war with every country that we trade with, we wouldnt be facing high lumber costs because most of it can be attributed renegotiating trade deals with Canada.
People can blame the current president all they want but the simple fact is that 45 really had no clue what he was doing most of the time.
- Badgerstate
^Spoken like a true globalist. ^
Make
America
Great
Again.
I heard Biden wants to put a man on the sun. He says we can do it at night.
Ever consider that it's not either ones fault and it's just something that happened?
Last time I checked, I had plenty to eat, and a good roof over my head. Country is still a great place to live that allows you to do pretty much anything you want.
It was a squirrelly year. Might take more than a couple months to get back to normal.
Ever consider that it's not either ones fault and it's just something that happened?
Last time I checked, I had plenty to eat, and a good roof over my head. Country is still a great place to live that allows you to do pretty much anything you want.
It was a squirrelly year. Might take more than a couple months to get back to normal.
Yeah most people completely lose perspective. When you buy that new Woodpecker one time tool, that could feed a village in some poor countries for a month. A Starrett combo square costs a 6 month salary in India. But people here flip out when plywood costs $50.
Osb or orientated strand board is 60 a sheet before taxes.
When do admit there's a problem when it's 100 dollars a sheet and gas is 7 $ a gallon.
Who care what the price tea is in India or China. Not me.
Osb or orientated strand board is 60 a sheet before taxes.
When do admit there's a problem when it's 100 dollars a sheet and gas is 7 $ a gallon.
Who care what the price tea is in India or China. Not me.
Within a 5 year period in my life time, I paid 5$ for gas and for a short period .69 cents. Guess what it is right now? Exactly in the middle has been for awhile.
Things are a little screwy. It will stabilize. It always does.
Will everything go back to prices before? No. And that's probably a good thing. It's normal for prices to gradually increase. It's not normal for oak plywood to stay the same price for 25 years.
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