Food, fuel costs put businesses in pinch
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Kai Ryssdal: Producer Price Index is just a fancy way of saying wholesale inflation. And we learned this morning it jumped 1.1 percent last month, more than double the forecast.
What’re called “core” prices — they don’t count food and energy — rose just two-tenths of a percent, but really, who doesn’t use food and fuel?
Marketplace’s Sarah Gardner reports.
Sarah Gardner: Today’s inflation numbers were startling. Diesel fuel is up 15 percent, heating oil 13 percent, the price of rice rose 8.7 percent. Many businesses want to pass their rising costs onto their customers but they can’t. Bank of America economist Peter Kretzmer:
Peter Kretzmer: By pushing through a price increase, the reduction in demand is such that it would cost the company more to increase prices than to keep prices the same, so they decide to not pass these things through.
That’s the calculation Sandra Westlund-Deenihan has made. She’s president of a small Midwestern company that makes water-leveling devices used in everything from cruise ships to desalination plants. Instead of raising prices, she’s cut costs through energy efficiency, an employee wellness program and by recycling the high-priced oil used in the company’s hydraulic presses:
Sandra Westlund-Deenihan: It’s almost like a dialysis where all of the oil is taken out, purified and then it’s recycled back into the equipment so we’re not having to buy new oil.
Deenihan says the weak dollar has also helped her survive inflation by boosting her exports to places like China and Singapore.
Hank Cox is with the National Association of Manufacturers:
Hank Cox: There’s a ray of sunshine out there for the companies that export a lot and most manufacturers do export.
Some businesses have no choice but to pass on costs. That includes some steelmakers who’ve seen the cost of coal and iron ore skyrocket.
I’m Sarah Gardner for Marketplace.
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