What, Me Worry? – Inflation and the ManufacturerPosted By : Armada Corporate Intelligence | Date : March 10, 2021
Suddenly inflation is all that anybody in the financial and business community can seem to talk about. After close to twenty years of almost no inflation threat there now seems to be a serious concern. The fact is that core rates remain well below the target that has been set by the Federal Reserve and even further below the levels the Fed discussed at the central bank get-together in August. The threat is still a future concern.
Inflation in Manufacturing
Of the three planks that make up inflation, one is truly moribund, one is manifesting right now, and the third could be a factor later. There is no general wage inflation to worry about although the manufacturers have been seeing more costly skilled labor as it is in short supply. The commodities are where there has been significant inflation already. Metal prices are up sharply and so are commodities such as lumber. Oil has come up a bit and food will be rising sooner than later. The major reason for these hikes is simple enough – producers still do not trust future demand and have not stepped up their output. The inflation rates will calm down as the demand becomes more reliable and that happens as the lockdowns end and the economy starts to bounce back more aggressively.
Federal Reserve Response
The longer-term concern is money supply. Will nearly $2 trillion in stimulus trigger overheating as money starts to chase money? This alone is not the crucial worry. It is the possibility of a rate hike by the Fed in order to control that inflation that creates concern. At this point the Fed has been insistent that no such hike is contemplated but a surge in prices could change their mind. The manufacturer is seeing more inflation than most other sectors – commodities and wages are up and if rates start to rise, those capital spending plans could be challenged.
Designed to Give Manufacturers a Competitive Edge
There are few sectors of the economy as complex and challenging as manufacturing, The competitive threats come from all directions and all the time. Staying ahead requires knowing what is around each corner - whether it is a threat or an opportunity. The ASIS projects into the future with a carefully constructed set of models that maintain over 97% accuracy so that manufacturers can anticipate. It takes time to be ready for these competitive threats - the ASIS provides that time.
Watch John Nelson from Morris, Nelson & Associates along with Chris Kuehl and Keith Prather from Armada Corporate Intelligence review the monthly IPMAN report.