Americans looking to spend some extra cash coming out of the pandemic are about to get pinched by rising prices everywhere they turn.
Consumers can expect to start spending more – if they haven’t already – at grocery stores, cafes, drugstores, gas stations – and even on expensive items like washing machines, laundry, etc. consumer electronics and cars, economists say.
“We’re seeing dramatic price increases right now and we’re going to see it rise by mid-summer,” warned Mark Zandi, chief economist at Moody’s Analytics. “The prices will go up and it is very varied.”
Procter & Gamble warned last month that it plans to increase the prices of baby products, adult diapers and feminine care brands by September. Gasoline prices, meanwhile, climbed to $ 2.98 a gallon in April, from $ 1.87 a year ago, as people start planning their first summer vacation since 2019.
Cars are so scarce that desperate vacationers in Hawaii have recently been forced to rent U-Hauls, according to reports.
In many ways, this is a simple supply / demand issue. Consumers are emerging from the pandemic with bigger wallets thanks to a combination of stimulus checks and savings accumulated as they squat at home. But their eagerness to spend that money exceeds Corporate America’s ability to produce goods amid a series of supply chain problems caused by the pandemic.
“The question,” said Andrew Hunter, senior US economist at Capital Economics, “is how long is this going to last.” The Federal Reserve “is trying to reassure everyone that this is a temporary trend related to the reopening of the economy,” Hunter said. But there are signs that the price hike could persist for months, if not years.
Boston retailer Yale Appliances, for example, recently warned its customers that the prices of household appliances from major brands, from GE to Whirlpool, could rise 2.5% to 10% in the coming months. And prices aren’t expected to drop again until “late next year or early 2023,” according to Yale Appliance chief executive Steve Sheinkopf.
âThe home appliance supply chain is not designed to recover quickly,â Sheinkopf explained in his April 16 article on the company’s website.
Even as the coronavirus loosens its grip on the United States, it continues to wreak havoc on companies’ ability to access raw materials such as metal, copper and wood pulp, as well as electronic parts like computer chips.
The chip shortage is disrupting a wide range of industries, from home appliances to cars – and could soon drive up the prices of consumer electronics like smartphones, game consoles and computers, experts say.
In April, Apple said the chip shortage would hamper production of iPads and Mac computers, an issue that could cost the company between $ 3 billion and $ 4 billion this quarter.
According to The Verge, the global semiconductor shortage – which has already led to consumer complaints that the latest PlayStation and Xbox game consoles are hard to find – could last for months, if not for the remainder of 2021.
Millions of cars, meanwhile, are idle in factory batches awaiting computer chips, according to reports. And car prices are skyrocketing as a result.
The average price of a new vehicle rose 6% to a record high of $ 40,578 in December, according to data from Edmunds.com. The cost of a used car has jumped a lot more, 70% compared to a year ago, according to Moody’s Zandi.
Car rental companies are normally big suppliers to the used car industry, but they significantly reduced their fleets last year due to lower demand. As travel picks up, rental companies can make big bucks for cars left on their lots – charging $ 200 per day in some cases.
Pulp is also scarce amid a wave of pandemic-linked home improvement projects associated with the fallout from the Trump administration’s trade wars. It’s the cause of planned price hikes on a range of everyday items like diapers, toilet paper and tampons, experts say.
The wood pulp shortage also resulted in an additional cost of $ 24,000 for a new home, according to the National Home Builders Association.
Grocery prices rose 3.5% from a year ago, well above the normal annual increase of 1% to 1.5%, amid skyrocketing transportation costs and consumer demand, according to Hunter of Capital Economics.
Bloomberg News reported Thursday that 50 of the 52 grocery categories tracked by NielsenIQ cost more than a year – seafood prices rising 18.7% in the 13-week period ended April 24.
One reason for the jump, according to the CEO of Albertsons Cos., Is that grocers no longer have any reason to cut prices.
âWhen there is a shortage of supply, it makes no sense to promote aggressively,â Vivek Sankaran told Bloomberg. âThat’s why you see inflation in certain categories. It just doesn’t make sense to play with the price at this point.