The Zero-Dollar Bill at left isn’t real, of course. But if things keep progressing as they have in the past six months or so, we should all be prepared to “feel” like our money’s become worthless as consumer inflation shifts into overdrive. It’s already a reality for manufacturers, including converters and packaging printers. Just take a look at these recent headlines:
- Flint Group raises packaging ink, flexo-printing plate prices
- RockTenn to raise UCR paperboard price by $50/ton
- Sonoco-Alcore ups European paperboard prices on May 9
- Ashland raises p-s adhesive prices in North America
Don’t expect a slowdown in price hikes anytime soon. Two just-released surveys by Chicago-based business analyst Grant Thornton LLP show that US manufacturing CFOs and senior controllers have serious inflation concerns despite their general optimism for the domestic economy. Here are a few results:
- Forty-one percent of respondents think the US economy will improve in the next six months, compared with 29% who expected improvement back in October 2010.
- Over the next six months, two-thirds of respondents expect to increase the prices or fees charged by their companies. This is a doubling of the 35% that said the same thing six months ago.
- In the same survey, 65% say they’re concerned about a double-dip recession—about the same number who expressed that opinion last fall.
My Thoughts: So, is the Inflation Monster rearing its ugly head? And what is your company doing about it? As converters, you have for years now held the unenviable middle position between rising raw-material prices from your suppliers and the “hold the line on prices, no matter what” attitude of customers. I’m thinking your only current recourse has been to add fuel surcharges to shipments in an almost vain attempt at dealing with nearly $5-a-gallon diesel.
It should come as no surprise that higher crude-oil prices are also having a noticeable impact on inflation. The US Producer Price Index was up 5.8% year-over-year back in March already—the biggest increase since March of last year. The Consumer Price Index was up 2.7%. But these are “overall” numbers. What matters most right now to your real end-user consumer customers, though, are energy costs—like the 27.5% jump in gasoline prices during March alone. How much of that cost is NOT going toward purchasing the goods that are sold in your packaging materials? Most analysts say there’s a six-month lag between long-term higher energy prices and their real impact on the US economy? We may see the dreaded Double-Dip Recession hitting just in time for Christmas. Are you making contingency plans—just in case?