Today the "official"CPI was 7% - a number that's incredible not just because Disco was popular the last time we saw it this high, but also interest rates are still below 1%!! Something's gotta give and it will; prices will go up on everything.
The interesting number which didn't get all the press was the average income for workers fell meaning not only are prices going higher but we're earning less.
"Finally, and perhaps most importantly for Main Street, real average hourly earnings fell (down 2.4% YoY) for the 9th straight month..."
So we're all riders on an inflationary storm that very few of the decision makers in charge have ever seen before, much less have experience dealing with. There is no recent manual or "Inflation for Dummies" guide to help us plan for this so seek out one of your Boomer friends who was around and had hair in 1982 to get some advice lol! There are plenty of examples in Argentina, Venezuela and very recently in Turkey where swift effects of purchasing power destruction is reeking havoc on the supply chain.
"A shortage of workers has led to clogged supply chains and empty store shelves. Though there are signs the omicron variant cases could peak soon, lingering Covid issues combined with cold weather in the Northeast point ‘to renewed upward pressure on food prices,’ wrote Paul Ashworth, chief U.S. economist at Capital Economics."
"With CPI hitting a 40-year high today, as economists anticipated it would, inflation has shown us it is going to keep getting worse. People in some areas of the nation are already alarmed about food shortages. Prices are rising as shelves go empty. So are tempers."
This can be both blessing and curse for small businesses right now, one the one hand it's harder to get supplies and you pay more when you do. On the other hand however, there's pricing power again and that will keep profit margins robust as long as demand holds up.
I've been saying this now for a while but, we really haven't seen anything yet. None of the pent up drivers of inflation are going away in fact they're getting way worse.
Taking fixed rate capital works to the benefit of the borrower because everything you buy now goes up in price the next time you need it. Not capital though! You'll be paying the same rate 9 months from now while everything you buy with it will be higher.
Ride on!