Manufacturing delays mean retailers may consider raising prices

Justin Ho Jun 3, 2021
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When manufacturers charge more for finished products, retailers also look at raising prices for consumers. Joe Raedle/Getty Images

Manufacturing delays mean retailers may consider raising prices

Justin Ho Jun 3, 2021
Heard on:
When manufacturers charge more for finished products, retailers also look at raising prices for consumers. Joe Raedle/Getty Images
HTML EMBED:
COPY

The manufacturing sector notched its 12th consecutive month of growth in May, according to a report this week from the Institute for Supply Management. However, the same report found that factories are having to wait longer to get the production materials they need. It’s taking 85 days, on average — that’s the longest waiting period since the ISM started tracking this data in 1987.

Manufacturers are facing a particular shortage of steel and aluminum, according to the ISM’s Tim Fiore. He said tariffs on imported metals are pushing up prices. That means manufacturers are leaning more on domestic steel and aluminum, “and that then sucks all the capacity out,” Fiore said. That puts North American steel mills under more strain. “What used to be, you know, 10 weeks or so in lead time is now 20,” Fiore said.

That’s causing manufacturers to order more metals so they don’t run out, “which means there are further shortages,” said Dartmouth trade professor Emily Blanchard.

In turn, Blanchard said, retailers are paying attention, trying to anticipate whether manufacturers will start charging more for finished products. Their thought process? “When I think prices are going to rise in the future, when I get stock back on my shelves, I raise my sticker price to my consumers as well,” Blanchard said.

For now, Blanchard said she’s optimistic that most of these delays and shortages are short-term disruptions. The tariffs, on the other hand, are not likely to go away any time soon.

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