Image courtesy of Adobe Stock.

There are a lot of indications the inflation rates we’ve seen in the last year or so are going to continue. My guess is we will see higher inflation in the next year than we did in 2021. Author of the article discussing PPP says he expects a shock in the CPI sometime in the next few months.

Merely a few recent items pointing towards sustained and even increasing inflation:

  • Dollar Tree is now $1.25 Tree.
  • Experienced farmer describes how severely inflation is hitting his operations. Those increases are going to appear on the store shelves soon.
  • Producer Price Index is accelerating. Indications that unprocessed and intermediate goods are going up far faster than what we’re seeing at retail, so expect accelerating inflation.
  • Unusually high lumber prices are back.
  • Decent prices on cars will be harder and harder to find.

Dollar Tree is now Dollar and a Quarter Tree – Bought a couple items at Dollar Tree. They all rang up at $1.25. Glanced around the store noticing all the signs said $1.25.I asked the clerk about it and he said everything in the store is now a dollar and a quarter.

Wall Street Journal – 12/8/21 – Inflation Isn’t “Transitory” on My Farm – The Federal Reserve for most of this year has been using the word “transitory” to describe inflation. This means it is momentary and will disappear any moment.

They have recently backed off from the term.

A farmer with 45 years’ experience described the complete lack of transitoriness on his farm where he raises corn, soybeans, and flowers.

The plastic pots he needs next spring to hold all the flowers he is going to sell are floating off the coast of California. He got an email from his supplier saying he had to pay for an extra $20,000 of shipping before he would get the plastic pots.

At this point he is concerned he may not get them in time to be able to sell any flowers.

Then, after getting that depressing news, fertilizer vendors called. The uncertainty regarding price of fertilizers is whether they will double or triple.

The first of three rounds of fertilizers cost him an extra $50,000. He anticipates the second and third rounds will cost an additional $40,000. That’s about $100,000 of extra fertilizer cost. With no immediate prospect of increased prices. He will have to attempt price increases to recover those soaring costs.

The Last Refuge – 12/14/21 – November Producer Price is Price Record Breaking 9.6% Year Over Year, Biggest Single Month in History, as Massive Inflation Builds Within The Supply Chain – Again, No Signs of Slowing Down – The commentator dives deep into the Producer Price Index. I need to study it deeper and pull up more of the stats.

Article explains the PPI tracks wholesale prices at three different stages of production: origination, intermediate, and final. This allows us to watch costs as materials move their way through the production process, from purchasing the commodities, to unprocessed goods, to intermediate demand, to sale by the producer.

Article lists the change in Processed, intermediate, and Unprocessed goods by month and year-over-year cumulative change.

Unsettling news in intermediate demand is only one month in 2020 has had less than 1.0% inflation. The 12 month change as of November 2021 is 26.5%. Ouch.

Even worse is the Unprocessed goods index, which shows 1.8% in June as the lowest increase in the last nine months. In the last three months of September through November the increases have been 2.7%, 5.5%, and 4.8%. Yes, that’s a 4.8% increase in unprocessed good price in November by itself. The year-over-year change for November is a whopping 52.5%.

Reason for those massive increases is the increased cost of energy which is a component of every single step of production. Those skyrocketing energy costs are getting built into the cost at every step of production.

Those costs are going to work their way into consumer prices in the next several months. Author speculates we are 30 days away from a shock in the CPI. A month ago the author predicted we were 60 days away.

Recommendations from the author include more aggressive shopping, looking for coupons and discounts. Also recommended is learning to buy components of cleaning supplies and reformulating them.

Stepping forward a bit of time after we have seen a few shocks in the CPI, people will eventually start reducing the amount of purchases. People have to cut back when realizing most of stuff they buy has gone up 5% to 10% or more. Curtailing spending is what we usually call a recession, the article points out.

The next few months could get bad.

Wall Street Journal – 12/19/21 – Sky-High Lumber Prices Are Back – Lumber prices fell from a peak of about $1,711 per thousand board feet back in spring 2021 to under $600 in November 2021. They are now sitting at $1,089 per thousand board feet.

With supply constraints such as washed out roads limiting production at Canadian lumber mills and construction starts continuing at high and accelerating rates, demand for lumber is expected to remain strong putting additional pressure on prices.

That will put upward pressure on inflation rates.

Wall Street Journal – 12/14/21 – Why a Car Deal Will Be Hard to Find This Holiday Season – Percent of new vehicles selling at or above the sticker price:

  • 36% of sales – before the pandemic
  • 75% – midpoint of 2021
  • 87% – November

Thus the opening point to the article, which is if you can find a new vehicle you’ll be fortunate if you pay merely the sticker price.

Car dealers are dumping discounts and adding up-charges to what is on the sticker. It is no longer just “dealer prep” or an extra charge for something in the vehicle you’d considered normal. Now there is a bold “market adjustment” added onto the sticker.

A friend of ours checked on a new car dealer and first comment received after a hello, how are ya’ was every car on the lot had an $8000 markup over sticker.

Used car prices are soaring, with article saying some used cars are selling above the original sticker price.

Article cites industry insiders as expecting the tight supply to last until the middle of next year.


0 Comments

Leave a Reply

Avatar placeholder

Your email address will not be published.