NYT: A Corporate Quandary Over Raising Prices

[DeepModem Mom]

A Corporate Quandary Over Raising Prices
By EDUARDO PORTER

Published: April 16, 2004


....Economists acknowledge that a surge in commodity prices - everything from oil to steel to wood - is putting upward pressure on inflation. A recovering economy is also giving companies somewhat more leeway to try to raise their prices to consumers.

Yet competition from low-wage producers abroad, combined with generally stagnant wages in the United States, has convinced many economists that inflation is not about to catch fire....

***

To a large degree, the March inflation bump was driven by special phenomena. Energy prices surged by 1.9 percent from February to March, on a seasonally adjusted basis, led by a 5.5 percent increase in the average price of gasoline.

The other main contributor to the price jump was lodging away from home - up 3.8 percent in March - as rates at hotels have continued to rise in response to the travel industry's continuing recovery from the lingering effects of the terrorist attacks in 2001. Few analysts expect the surge to continue, though, because it would mean an unlikely annual lodging inflation rate of 56.4 percent....


http://www.nytimes.com/2004/04/16/business/16price.html

[whistle]

1. Right, they caution us about annualized lodging inflation being 56.4%...

...but my calculation for annualized energy inflation is 25.6% and annualized gasoline inflation is 90.1%. Those can and will continue because big oil and big energy companies have a lot more clout than big lodging companies :freak:

[unblock]

2. inflation will remain in check

because people will cut back rather than bid up higher prices. in other words, the burden of rising commodity prices will be borne on the backs of those who can't afford it because they are jobless and/or their wages are not rising.

of course, this will squeeze corporate profits, too. nobody wins.

except the domestic oil producers, of course. and the credit card companies, of course.

did i mention that they donated a ton to the republican party?

[seasat]

3. I think we have had inflation for a while.

I was relunctant to agree with others that pointed out that the government CPI statistics are broken but I now believe them. The cosumer purchase numbers have been consistently high during this "recession" yet consumer confidence has remained low. During an inflationary period consumers spend money instead of saving it because the value of the money declines so fast. The consumers have currently spent money even to the point of running record debts in credit cards. An inflationary environment would explain their low cofidence along with high spending. IMHO, we are heading for a serious down turn in the next year.