US companies say inflation pressure is now “brutal” due to supply pressures – News Couple

US companies say inflation pressure is now “brutal” due to supply pressures

A chain of US companies revealed this week that shortages in the supply chains that US companies depend on are translating into widespread inflationary pressures, disrupting their operations and forcing them to raise prices for their customers.

Whirlpool on Friday blamed “inefficiencies across the supply chain” for “extremely brutal” price increases for steel, resin and other materials, saying those increases would add nearly $1 billion to hardware makers’ costs this year.

“On any given day, something is out of stock in the store,” Albertsons CEO Vivek Sankaran said, likening the grocery chain’s efforts in responding to cascading challenges to a Whac-A-Mole game.

Asked this week what ingredients and supplies Chipotle has found difficult to secure, Jack Hartung, the restaurant chain’s chief financial officer, replied: “All of them.”

The pressure on every link in the supply chain, from factory shutdowns due to the Covid-19 outbreak to difficulty finding enough employees to unload trucks, is spreading across sectors, heightening questions about the threat inflation poses to robust consumer spending and the return of corporate profits. .

In recent days, the largest US airlines have complained about rising jet fuel costs, toy maker Mattel has outlined the challenge of high resin prices and Danaher has joined the list of manufacturers struggling to source electronic components.

On Wednesday, the Federal Reserve’s Beige Book of Economic Conditions summary said supply chain bottlenecks and labor shortages have slowed the pace of economic growth in much of the country. The report pointed out that “most regions recorded a noticeable rise in prices, supported by the high demand for commodities and raw materials.”

Congested ports, a shortage of truck drivers and record low warehouse vacancy rates have hit strong demand from consumers and corporate clients alike to create a “quiet mess,” said Ethan Karp, CEO of Magnet, a nonprofit consultancy that works with manufacturers.

“They are busier than they have ever been, but they can’t find the people to ship what they have already produced,” he said. He added that companies have been experiencing unpredictable delays and are paying on odds for gray market supplies, but that “the situation is very upside down and it is getting worse because . . . ports are being backed up and orders are still arriving.”

Most companies said they were able to offset these higher costs by raising their prices or finding efficiencies elsewhere.

Procter & Gamble, the maker of Tide and Charmin detergents, said this week it would embark on another round of price increases after warning that supply chain costs would be higher than previously expected. Andre Schulten, P&G’s chief financial officer, said it has reported price increases for nine of its 10 product categories in the United States, with average increases of single digits across most of its portfolio.

Earlier this month, PepsiCo said its price increases could continue into the first quarter of next year, while Tesla said it was also adjusting prices to compensate for higher costs for goods and labor.

Executives plan for cost pressures to remain high through 2022 but are concerned about raising prices too much if inflation proves short-lived. “I don’t think inflation will go away in the next quarter, two or three quarters,” Hartung said, adding that wage inflation was unlikely to be temporary even if commodity prices fell.

“We know we have pricing power,” he said, but added, “For some of the offerings available, there will be a limit to what customers are willing to pay.”

Matt Buckett, VF Corp’s chief financial officer, said the company has curbed writedowns on Vans sneakers and North Face jackets to expand profit margins despite factory shutdowns in Asia and port congestion in the United States.

“Over time, I think [inflation] We will start with moderation a bit, but we plan as if we will continue to see meaningful increases in freight moving forward,” he said.

Andrew Nutella, United Airlines’ chief commercial officer, echoed that message on Wednesday, saying that congestion at US ports means it’s “airplaneing things today that we haven’t traditionally done,” a situation the airline expects to continue into 2022.

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