Tag Archives: inflation

Business/Economics, U.S.

Get ready for price hikes on soap & diapers, Pepsi says profits affected by inflation

Several big corporations who make products from soap to diapers, say they must pass on the higher prices they’ve been paying for raw materials.

“I don’t want to get into shoulda, coulda, woulda; but if you step back, if we didn’t have $1.8 billion in commodity cost increases this year, we would have a fantastic bottom line.”-Jon Moeller, Procter & Gamble

Despite slow sales in the United States, because of the bad economy, the very same corporations complaining of the higher costs they’re paying, are spending money to come up with new products, and of course that’ll be added onto the price you pay at the store.

In the world of soda pop and snacks, Pepsi says their profits are being affected by the increasing price of their ingredients. PepsiCo also owns snack food maker FritoLay, and juice brand Tropicana, as well as other brands.  Even though Pepsi says their profits were affected by inflation, they still did well.  They also said they’ve adjusted their business forecast to take into account “…high global commodity cost inflation, difficult macroeconomic conditions in developed markets and ongoing strategic investments in emerging markets and in brand-building activities.” In other words, price hikes.

 

 

Business/Economics, U.S.

Federal Reserve admits inflation is a problem, new jobs could make it worse

Despite years of denial, the Federal Reserve ( a privately run bank) is now saying inflation is a concern: “If we are going to have success in creating a long-run sustainable recovery with lots of job growth, we have to keep inflation under control.”-Ben Bernanke, Federal Reserve Chairman

The problem is so bad that the Federal Reserve is worried that job growth could actually make things worse: “It is not clear that we can get substantial improvements in payrolls without some additional inflation risk.”

Federal Reserve chairman Bernanke had been saying for months that inflation isn’t that much of a problem.  Now Bernanke is saying that the best way to create jobs is to keep prices down.  In other words, fighting inflation is now the main focus, jobs will come later.  As part of the fight on inflation, the Federal Reserve has decided to keep the interest rates it charges financial institutions low/unchanged.

Business/Economics, U.S.

Unemployment up, spending way down, blame it on the inflation the government denies is happening

Job analysts were shocked Thursday, April 28, when the weekly first time unemployment claims jumped by 25,000.

“This is a major disappointment because it’s another move in the wrong direction. This is more than just a misstep for the job market. It’s a signal that the robust job growth we’ve seen recently is poised to lose momentum.”-Tim Quinlan, Wells Fargo

Total number of initial jobless claims jumped to 429,000 in the week ended April 23, analysts were expecting it to drop to 390,000.

The government is reporting that overall unemployment numbers show a drop in unemployment, but, more and more analyst think that’s because unemployed people have simply exhausted the time limit for unemployment benefits, NOT because they found work.

“We can’t be certain it’s a positive trend yet. The Labor Department doesn’t specify whether these people are rolling off their benefits or if they’ve found jobs.”–Tim Quinlan, Wells Fargo

Another factor is that each state has its own limits on unemployment benefits, so the federal reporting is not accurate state by state. For healthy improvement in the job market  the economy needs to add between 150,000 and 200,000 jobs every month, which it has not been doing.

Add to the jobs loss shock, the GDP shock.  The U.S. Commerce Department reported Thursday, April 28, that Gross Domestic Product percentages fell to 1.8% (it’s funny, some media reports are calling it an increase, maybe compared to last April).  At the end of 2010 GDP was at 3.1%, so April’s numbers are definitely a drop.

The Department of Commerce is blaming the drop on decreased consumer spending, due to, guess what, inflation.  The drop shocked analyst who were expecting GDP to hit 4.3%.

“Undoubtedly, consumers are cutting discretionary spending to compensate for rising food and energy prices.”-Jim Baird, Plante Moran Financial Advisors

Retail prices were up 3.8% from a year earlier.  Add to that the slow housing market, decreasing government domestic spending (even though the government continues to spend money outside the country), and even bad weather are taking a toll on any “recovery”.

 

 

Business/Economics, International

Currency Wars Pushing Global Inflation

On October 2nd, the head of the International Monetary Fund (IMF) warned the world’s countries not to start a currency war. Such action could end any economic recovery. The problem is that it appears that the world is already in a currency war.

Today, October 6th,  an RT (I think it stands for Russia Today) program called Cross Talk, interviewed three currency analysts about the race, by most countries, to devalue their money.

Countries want their money to be low in value in order to attract foreign customers. International trade is key to growing a country’s economy. An economy that’s based on domestic trade only, leads to stagnation. But, if all the major traders in the world crash the value of their money the result could be worse than an economy based only on domestic trade.

The analysts interviewed on RT represent companies/organizations from Hong Kong, Russia and the U.S.

They said currency devaluation works only if a handful of countries do it. The problem is that “everyone” is doing it. The result will be global inflation.

The analysts agreed that the coming global inflation will not affect the ‘western’ countries as badly as the rest of the world. They didn’t give any example of how bad it would get.

An allegory was used to explain the effect of most countries trying to devalue their money at the same time: It’s like a marathon where you have so many runners that they knock each other out of the race. I other words, some countries are going to have their economies “knocked” out.

To solve the problem of currency wars, the analysts said world leaders might create a common global currency, or at least common rules on currency trading.

Increasing commodity prices, currency wars, actual wars, massive debts owed by governments, continuing job losses, etc. It seems to me that despite the positive spin our leaders, and main stream media puts on our economy, the evidence is clear that things are going to get worse. Buckle up.