In the case of tires, wholesale prices have risen swiftly mainly because of higher costs for rubber, steel and carbon black, said Saul Ludwig, a managing director of Northcoast Research in Cleveland.[1]...[1] - Inflation in commodities is raising producer prices. That didn't help demand at all, did it?
Goodyear imposed price increases of as much as 6% on Oct. 1. Meanwhile, Cooper Tire & Rubber Co. has announced an increase of as much as 6.5% starting Nov. 1.[2]
Consumers are pushing back. "I'm getting people screaming at me," because a set of tires now often costs $400 to $1,000, depending on the vehicle, said Daniel Schreck, president of Main Street Tire in Bismarck, N.D. More customers are choosing less expensive store brands rather than Goodyear or Cooper, tire dealers say...[3]
Robert Kellogg, owner of Warren Tire Service Center Inc., with 14 stores in upstate New York, has lowered repair and building maintenance by 10% by having employees do work once outsourced, such as mowing lawns, cleaning stores and repairing equipment.[4]
[2] - Retailers are seeing higher prices that they can't pass on to customers. They make less profit. Jobs come from profit, so no hiring this year.
[3] - If you make something more expensive, people will buy less of it. That includes labor, Mr. Obama. Increasing mandated benefits and wages is a price increase.
[4] - They fired people.
Good summary of one side of it. The other side is the garbage the fed is buying. Mostly "agencies" (read mortgage securities) so far, with some treasuries. How is the fed going to sell that stuff when they need to withdraw liquidity?
ReplyDeleteAbout the commodity price inflation: I think it's worth noting that this is being driven by increased demand (mainly from China), at least as much as, if not more than, it is by general inflation of the currency.
ReplyDeleteI was just visiting the Tilden iron ore concentrator today (in connection with a project we are doing for them), and they were very definite that the price of iron ore pellets were up almost entirely because China Wants Iron.
Ecverty morning, I visit the Bloomberg site. Almost every morning, the Dollar is getting whacked. That can't happen without commodity inflation. It looks like the Fed is going to print more money soon, leading to more commodity inflation. The article points out that this inflation is not being passed on to the consumers. Instead, companies are firing people, trying to cut costs to the bone.
ReplyDeleteTim, thanks for the report from Reality. I didn't know that part about the iron ore.
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