The dreaded salesperson-to-buyer call: “Tina, I hate to have to tell you this, but we have to raise the price on your cargo nets….”
At Troyer Products we are seeing significant rises in the cost of goods sold side of the ledger, and have had to place more than a few of these difficult calls. Manufacturers here in Northern Indiana are all in the same boat, so buyers are hearing it from most of their suppliers. Maybe that makes it a LITTLE easier to swallow. If companies “pass on increasing costs only minimally, delayed or too conservatively, or if increasing raw material costs coincide with decreasing sales prices, a margin squeeze is inevitable.” (1) A “margin squeeze,” we are willing to weather. But, obviously, crashing and burning would be devastating to us, our employees, and our customers.
Inflation worries us. Raw materials are up pretty much across the board. Wages have also increased, due to the pressures of massive employment needs and competition for good workers— which also makes it a great time to be looking for a job in Northern Indiana!
The causes of inflation are varied, with economic sectors variously affected. Gas prices had risen 31% over the four months from December to March, acting as the main driver of higher inflation during that time. (2) Demand for gas is rising as people begin traveling and commuting again, and energy producers struggle to meet the need. Used car and truck prices are up. Lumber prices have soared, with mills and producers not fully anticipating the rise in DIY and big box store demand during the pandemic.
Clothing, conversely, is still cheaper than pre-pandemic levels. Perhaps many of us are not yet ready to give up on our comfy sweat pants and tee shirts.
In March, the overall annualized inflation rate reached 2.62%, up from 1.68% in February (3). The Federal Reserve estimates that the rise in inflation will be temporary as the economy kicks into high gear. (4)
We continue to be hopeful for a stable economy with minimal and fleeting inflation difficulties, and that continued strong Recreational Vehicle production and sales will propel us through. Hold on to your hat (or your awning, as the case may be!)
Sources:
1) https://www.thomasnet.com/insights/how-to-cope-with-unpredictable-raw-materials-costs/
2) https://www.kiplinger.com/economic-forecasts/inflation
3) https://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp?reloaded=true
4) https://www.forbes.com/sites/sarahhansen/2021/03/17/federal-reserve-looking-ahead-to-higher-inflation-as-economy-rebounds-but-it-wont-raise-rates-yet/?sh=715560fd29ca
