Americans’ wallets are on fire. With consumer prices last month, some policymakers fear that the hyperinflation of the 1970s is imminent.
But that is unlikely to happen, say most economists. To be sure, today’s price hikes are real: the cost of everything from lumber to food to airline tickets is rising, as factories report shortages of materials and workers. . But many, if not all, experts say those increases are likely to be temporary, reflecting the rapid reopening of the economy as the pandemic subsides rather than long-term supply issues.
“[T]The current rise in inflation will prove to be transitory, “Societe Generale analyst Albert Edwards wrote Thursday in a report titled” Don’t panic, for now! “
Reopening “all at once”
Most of the price increases in April and May were for expensive consumer goods, such as cars, furniture and appliances. Only three main categories – used vehicles, new cars and trucks, and furniture – account for more than half of the rise in the price of goods since January 2020, according to Capital Economics.
These price increases are partly time schedule. Most Americans, stimulated byand tax refunds, are willing to spend, including on larger purchases that they postponed during the pandemic.
Yet in many cases inventory is low – there is not a year of unsold items waiting to be bought. Factories closed last year, sometimes for months. Now that customer demand is increasing, manufacturers are struggling to produce and ship everything.
“The supply chain capacity is sort of overwhelmed right now,” said Zac Rogers, assistant professor in the College of Business at Colorado State University. Last year, “because the demand was so low for so many products, there was not much product.”
Now that consumers are ready to spend, “it all happened very quickly,” he said.
What drives up car prices
Vehicle prices have jumped not only because of pent-up consumer demand, but also because of a continuing shortage of semiconductors, which are an integral part of cars and trucks. COVID-19 has slowed the production of these chips, most of which originate in Asia. Automakers, including GM and Ford, have cut production in response, while Tesla has raised the price of its Model 3 by $ 2,500 since February.
“Prices are rising due to major supply chain pricing pressure across the industry,” CEO Elon Musk tweeted last month.
At the same time, the slowdown in the number of new cars coming off the assembly line hasinstead, pushing the prices of these vehicles to historic highs. Since January 2020, prices for used cars and trucks have jumped 29%. Rental costs have risen again – 62% above pre-pandemic levels.
Other raw materials used to make products also become more expensive, further increasing the cost of finished products. Prices for aluminum, copper, steel and iron ore have all skyrocketed, with the Standard & Poor’s Global Commodity Index hitting a year-long high this week.
Strong consumer demand for vehicles is reflected in auto parts and accessories. On Thomasnet, a business-to-business procurement platform, searches for auto parts and accessories have tripled from a year ago, according to CEO Tony Uphoff.
“For a lot of people there is pent-up energy and they’ve been closed too much, so we’re fixing our cars, putting a new set of tires on the cars,” he said.
Houses – and things for the house – are increasing too
In May, the household furnishings and operations index rose at the fastest rate since the 1970s. This reflects fierce competition for wood, which is used to make everything from sofas and cabinets to. frames of new homes. Some furniture makers are seeing their costs go up to 30%, according to Jo Ann Arrant, representative for J Furniture in Amory, Mississippi.
“I’ve been in furniture for over 30 years and I’ve never seen anything like it,” she told WCBI, a CBS News affiliate.
Record lumber prices, which tripled from last year, areaverage of $ 36,000 per home, Rob Dietz, chief economist for the National Association of Homebuilders, told CBS MoneyWatch. For a new apartment, the price increase is approximately $ 13,000, which translates into an additional rent of $ 120 per month.
Household appliances have also become more expensive, up 12% since last May. Prices for washing machines and dryers are up 26% from a year ago, and major appliance makers like Whirlpool have announced widespread price increases.
The rising cost of raw metals, along with the semiconductor shortage plaguing vehicles, is also affecting devices. This was exacerbated by delays in shipping finished products to their destinations.
“Home appliances are scarce – delayed delivery times or no set delivery times,” Dietz said. “The microwaves are in a container, and that container is not loaded from a container ship because it is waiting its turn at a dock in Los Angeles.”
The NAHB reported in March that 90% of builders were having trouble getting hold of home appliances.
Dietz added: “Whether it costs more or takes longer to arrive, we are seeing scarcity or shortages of appliances, lumber, trusses, windows and doors, and in some cases nuts and bolts. . “
Rising food prices
Food is another category of expenditure where consumers can be affected, largely due to rising commodity costs. Prices for corn, grains and soybeans are at their highest level since 2012, according to the Associated Press. This means higher prices on grocery store shelves and for a range of consumer products.
While food prices have not risen at the rapid pace of major consumer goods, they have risen 1.1% in the past four months, due to rising costs of meat, bread and Dairy products.
General Mills has said it is considering raising the prices of its products because grains, sugar and other ingredients have become more expensive, the AP noted. Hormel Foods has increased the prices of Skippy peanut butter. Coca-Cola has warned of rising prices to offset rising costs. And Procter & Gamble isduring the summer.
Carmela Romanello Schaden, a real estate agent in Rockville Center, New York, told the AP that her monthly food bill has risen to $ 200 or $ 250, from $ 175 earlier this year.
For example, a bundle of strip loin that usually cost him around $ 30 suddenly went down to $ 45. She noticed the increase just before Memorial Day, but still bought the item because it was for a family picnic. But she won’t and will switch to pork and chicken instead, Schaden said.
“I have always been selective,” she said. “When something goes up, I move on.”
Restaurants may soon follow suit with their own price hikes. This week, Chipotle Mexican Grill announced that it was increasing menu prices by about 4% to cover the cost of raising its employees’ wages to an average of $ 15 an hour.
The Associated Press contributed reporting.