Inflation is at its highest for 39 years. Michigan consumers and businesses feel affected

0

But as the price of bacon has jumped – topping 20% ​​in the past 12 months – the restaurant is also interested in spiraling cost management.

Related:

Earlier this year, he increased the price of the sandwich from $ 1 to $ 11.99, while fighting the temptation to reduce the number of slices in a sandwich, manager Teri Helmreich said.

“People don’t complain too much,” Helmreich said of Bridge Michigan. “They know what the prices are in the grocery stores.

“They know everything has increased.”

Data released Friday show that the federal consumer price index – the government’s measure of inflation – is increasing at the highest 12-month rate in 39 years.

The United States Bureau of Labor Statistics said seasonally adjusted prices for goods – from food and shelter to energy and products like clothing – jumped 0.8% in November. This follows a 0.9 percent increase in October, while over the past year, the unadjusted increase reached 6.8 percent.

It’s not just bacon. The price of pork rose 17 percent, as did breakfast cereals (5.7 percent), apples (7.4 percent), living room furniture (14.1 percent), laundry (9.7 percent), men’s suits and coats (14.1 percent), and cigarettes (9.1 percent). .) Housing, vehicles and energy also play a role in the increases.

This could get worse and force the Federal Reserve to act sooner than expected to scale back its bond buying program and raise interest rates, said Donald Grimes, an economist at the University of Michigan. The Federal Reserve meets Tuesday and Wednesday.

“It’s very hard for me to see inflation drop significantly anytime soon,” Grimes told Bridge Michigan. “So higher interest rates are almost certain. “

The November figures include an overall increase of 58.1% in gasoline, which consumers and transportation-related businesses absorbed until prices started to drop in early December.

Part of the complexity of current inflation, according to Grimes and other economists, is the role of federal stimulus programs which have added trillions of dollars to the economy to stabilize it during COVID-19. This has left people eager to spend the cash as items – including new vehicles, appliances, and electronics – are limited due to global supply chain constraints.

At the same time, the participation rate slowed nationally and in Michigan, where there were about 200,000 fewer workers in October than two years earlier.

Companies have struggled to hire, often turning to higher wages to attract workers. This too has increased the purchasing power of consumers and pushed up prices.

In the fall, 76% of consumers polled said inflation was more serious than unemployment, according to the University of Michigan Consumer Sentiment Survey.

UM economist Richard Curtin, who helped conduct the survey, said it showed 25 percent of households are experiencing “living standards erosion” due to inflation.

Businesses face similar supply cost pressures as they also grapple with the supply chain and labor disruption.

“The costs of materials have increased,” said Randy Thelen, President and CEO of The right place, a business development group in western Michigan. “… But they do not have the possibility of increasing their selling price.

“This means their margins are reduced,” he said. “And this is causing difficult income or income statements for businesses right now. “

The ongoing coronavirus pandemic – and new concerns about the omicron variant – could also play a short-term role in inflation, said G. Tomas M. Hult, professor of marketing at Michigan State University and chief executive of company in the American Customer Satisfaction Index.

“Supply chain vulnerabilities regarding the availability of raw materials and components – such as various automotive chips, etc. – will again be pronounced (with the variant) and likely lead to continued product shortages and product shortages. higher prices, ”he said.

Putting more public money in to alleviate supply chain bottlenecks may seem necessary, Hult said, but it could also cause even greater inflation even if it solves other problems. And that could also have an impact on investors, who already saw a drop in the stock market when the omicron variant was announced.

“Ultimately, a market correction is likely to come relatively soon,” he said.

Looking ahead, Grimes said he expects gasoline prices to peak. Over the past month, they have fallen to about $ 3.20 per gallon statewide, from $ 3.42 per gallon, according to AAA Michigan.

Some industries will be more vulnerable to rising interest rates, he added, such as housing, due to the conventional mortgage rate which is expected to reach over 4% by the end of 2023.


Source link

Share.

Comments are closed.