Pressure is mounting on the Biden Administration and the Federal Reserve to curb inflation, which jumped to its highest rate since 1982 last month after rising 7% rise year-over-year.
The Department of Labor announced this week that inflation excluding volatile food and gas jumped 5.5% last month. However, it’s worth noting that overall inflation rose 0.5% in November, an improvement over 0.8% in October.
But whether the inflation rate is topping out or not doesn’t alleviate the problem.
“U.S. inflation pressures show no sign of easing,” James Knightly, chief international economist at ING, told the AP. “It hasn’t been this high since the days of Thatcher and Reagan. We could be close to the peak, but the risk is that inflation stays higher for longer.”
Two years into the pandemic and with varying degrees of mitigation success, there is sort of a perfect storm for inflation. Spending on consumer products jumped after vaccines made people feel safer going out and multiple rounds of stimulus checks giving them the financial confidence to spend. But global supply chain issues are making it hard for companies to meet demand while driving up the price of goods.
Businesses across industries from auto manufacturing to grocery stores to the promo industry have had to increase prices. One bakery owner in Minneapolis told the AP that she’s had to increase cookie prices from 99 cents to $1.50 at the risk of turning off some customers, but it’s a choice of lose customers or lose the business.
It's actually amazing how much inflation is associated with a bulge in the prices of durable goods, which are most affected by the bottlenecks 2/ pic.twitter.com/HijJJTufhw
— Paul Krugman (@paulkrugman) November 14, 2021
The Biden Administration is taking steps to ease inflation, including pushing the Build Back Better legislation, which would lower the cost of things like child care, prescription drugs and elder care, but passing the legislation has hit multiple political roadblocks.
Brian Reese, director of the White House’s National Economic Council, has said that inflation has continued due to unemployment rates dropping faster than expected, paired with lingering pandemic-related supply chain issues, according to the Washington Post.
One example of that supply and demand issue is the shortage of semiconductors resulting in a 37% rise in price for used cars over the past year. Similar supply chain shortages have reportedly driven furniture costs 14% higher.
In the promo industry, obviously the issues of sourcing abroad are being met with demand for promotional products now that the world has returned to slightly more normal. In-person trade shows are happening again, so companies need marketing materials. Sports are being held in front of live audiences, necessitating branded products and giveaways. Schools are back in session, so they need supplies to attract applicants and products to give to students.
There’s hope that as the ongoing Omicron variant wave subsides, people will once again feel safer spending on non-essentials like experiences (travel, entertainment, etc.) rather than consumer goods, easing some strain on the supply chain.
The Fed plans to fight inflation by accelerating interest hikes planned for this year. But, in the meantime, consumers and promo distributors should expect price increases to continue well into 2022.
