#inflation #prices #shopping #rent #gasoline #groceries
If something costs too much, don’t buy it.
That can’t be said for everything, since we all need housing (rents), fuel for cars (gasoline), medication and food (groceries).
But, according to Christopher Rugaber, business and economics reporter for the Associated Press, companies are starting to lower their prices because people just aren’t buying their products in the volume they would like, at the prices they want to charge.
Apparently, it’s working. Last week, inflation dropped below 3 percent for the first time since 2021.
Rugaber’s article on the subject was published August 13, 2024, in The Atlanta Journal-Constitution.
Before Rugaber’s article, McDonald’s reportedly started lowering their prices on some of its most popular items because there were too few diners at many of their restaurants. It showed in their earnings report.
It’s good also to remember that government has little leverage in bringing down prices. It can do what it can for things it can regulate, such as bringing down the cost of insulin to $35 for senior citizens. One big lever they have is allowing Medicare to negotiate prices. This has helped bring down the government’s cost for 10 popular drugs.
But, what really helps bring down prices is the lack of buyers.
It’s simple economics. Set a price, see whether the market will bear it and adjust as the market adjusts.
For businesses, particularly small businesses whose product is not an absolute necessity, it’s a much tougher decision. Usually, these businesses know what prices the market will bear for their finished product. But, can they produce that product at a cost that not only covers what it costs them to make it, but also puts a little profit in their pockets?
It’s a struggle for some of these businesses, many of whom are facing labor shortages. When workers are few, they will demand higher wages. Can these businesses keep their workers happy, pay for ingredients that produce high quality products, pay for their workspace AND make a profit?
The bigger corporations have more pricing flexibility. If they, like McDonalds, see less traffic in their retail spaces because of prices, they usually can adjust to that more easily.
Sometimes that doesn’t work well for some of those who work for them, since labor is one of the places that corporations adjust.
In all, reports say that, given the labor shortage, most workers have seen their pay rise. A lot of the things we buy are priced higher to pay workers more. In most cases, workers’ raises are more than the price increases they are paying for necessities.
As Rugaber’s article implies, consumers are working hard at changing what markets will bear – whether they realize it or not.
So, here are some handy rules for buying: If it is something you need to survive, try to use less of it. (Don’t drive around in a 4X4 pickup truck if you don’t need to haul anything). If it’s something you want badly, but don’t absolutely need, look for bargains. It may not pay to drive five or six miles to save two cents on a gallon of gas, but it might make great sense to shop around if you’re in the market for, say, a big-screen TV.
Another rule: don’t long for the days of the pandemic when prices on just about everything were lower because people weren’t going anywhere. The disease was too much of a cost just to have lower prices. (By the way, the air was also cleaner during the pandemic, but that’s a story for another day).
Inflation ultimately adjusts when fewer people buy. So, work hard at your job, make as much as you can and try to spend carefully. Also, try to pay yourself first by saving a little of that paycheck for your future.
Peter
Tag Archives: inflation
EVEN FOLKS WITH ‘HIGH’ INCOMES HAVING MONEY ISSUES
#incomes #SixFigureIncomes #inflation #FinancialProblems #MoneyManagement
Yes, it’s possible that a couple making a six-figure income together can still have financial issues.
Nedra Rhone, “This Life” columnist for The Atlanta Journal-Constitution discussed this in a column published June 23, 2022.
Rhone says many people believe that anyone making six figures a year with financial problems have money management, not money, problems.
But as rents skyrocket and prices for gasoline and other goods rise to levels not seen in decades, it is possible for two people making a combined, six-figure income to have trouble making ends meet – never mind saving for the future.
Some decades back, a young couple just starting out in life might have thought that if they could just make $20,000 a year together, they would be OK.
Inflation has kicked that goal up fivefold, or more.
As Rhone points out, it’s great to teach kids, and young adults, good money management skills. It takes some discipline to watch what one spends money on. And, certainly, we all can improve our money management skills.
But, the lesson here is that costs of living can’t keep rising without some, if not everyone, feeling the pinch.
Food, shelter, clothing, energy etc. are all necessary for living and working. People certainly can cut out frivolous expenses, unnecessary trips etc. But everyone has to eat, have a roof over his or her head, drive to work etc.
Some recent trends are helping. For example, more people are working from home. That saves on energy, clothing and, perhaps, some food costs.
But, not everyone can work from home. In fact, it can be assumed that the less money you make at your job, the less ability you may have to work from home. Trades people, hospitality workers and others have no ability to work from home.
Fortunately, the world economy works in cycles. That means prices won’t stay at these levels forever.
Much of the high-price trends have to do with pent-up demand after pandemic lockdowns. More people are working than there were two years ago.
Wages are trending up, but many are no better off because of that pent-up demand. Some economic sectors are still having trouble filling jobs, even with offers of more pay and, perhaps, benefits.
A narrative is circulating that government policy is the prime driver of the inflation we are seeing. In reality, there is very little that can be done by government at any level to make a real dent in inflation.
The couple in Rhone’s column could look for a cheaper apartment. Those are hard to find in most areas. In fairness, landlords have had trouble the last two years getting tenants to pay rent on time because the pandemic cost the tenants their jobs temporarily. These landlords, along with retailers and other merchants, are trying to recover some of what they lost.
Rhone’s point in her column was not to criticize others’ financial situations. Don’t try to put a simple solution on a complex problem. Chances are, if you were in the shoes of the six-figure couple, you probably would face similar problems.
Times are tough for most of us. It’s time we all be less critical or judgmental of others, and more sympathetic and helpful.
Peter
SUPPLY-CHAIN ISSUES; THERE’S ONLY SO MUCH PEOPLE WILL PAY
#SupplyChain #inflation #IncreasingCosts #businesses
A burger chain is taking on increased costs caused by supply-chain problems.
But it realizes that people will only pay so much, so increasing prices too much will hurt more.
In an interview with Alexandra Canal for Yahoo Finance. Smashburger President Carl Bachmann said he is trying to manage his costs with great precision. The article was published Feb. 21, 2022.
“You have to take some small price increases, but we were very strategic about that,” Bachmann told Canal. “The key thing here is … managing your freight costs,” he said. “… all those little pieces of the puzzle behind the scenes to counteract the commodities as they continue to rise.”
Bachmann has utilized redundant vendors and global partners to ease supply-chain issues, which has helped curb price pressure, the article says.
Bachmann’s efforts may be easier said than done for some businesses. Because of a worker shortage, labor costs, as well as material costs, have risen. In fact, many of the increases in material costs can be attributed to labor shortages.
If there are not enough folks to load and unload ships at ports, and drive the containers to wherever they need to go, that will increase costs.
In a Feb. 25, 2022, article in The Atlanta Journal-Constitution, business reporter Michael E. Kanell reports that the backlog at the Port of Savannah appears to be easing. There are no more ships queued up in the harbor waiting to be unloaded, he writes. That port, the second-largest on the East Coast, is continuing to expand, which is also helping it move more goods, the article says.
All of these problems were largely activated as a result of the COVID-19 pandemic. Workers who were shut out of jobs for a good while are giving second thoughts to going back to them.
If there are fewer people producing or moving goods, prices will rise.
The news from the Georgia ports gives one a degree of hope that the end may be near.
But, the Russian invasion of Ukraine could put a damper on that hopefulness.
The pandemic may not have brought the world entirely to its knees, but it came very close.
Now, as the disease eases, record numbers of people are going back to work – many under better conditions than they had before.
That has to be considered great news, even though we are all paying more for that to happen.
But, as Bachmann points out in the Yahoo article, you have to manage EVERYTHING. You have to decide whether buying this or that is worth the cost. You have to decide whether taking this job, or that job, will leave you better off than you were.
A lesson here is to learn to make good decisions as early in life as you can. That means that no matter how much you earn at any given time, some of it should be saved for later in life. As your savings grow, they should be invested wisely, with the help of an adviser you trust.
As discussed previously here, you can bring your own coffee to work, as opposed to buying it by the cup. You can bring your own lunch to work, instead of buying it etc.
The little things, as Bachmann says, can make all the difference. To add to that, you can save on little things without always depriving yourself of life’s pleasures. Those pleasures can make life worth living.
Peter
CONFUSION IN THE STOCK MARKET
#stockmarket
“Main Street” is dumping stocks.
Professional investors keep investing, as the market, as of June 2014, was hitting new highs. The Dow since has passed the 17,000 mark.
Adam Shell, in an article June 12, 2014 in USA Today, writes that average investors in mutual funds are getting out of the funds heavily weighted toward stocks and moving into bonds and bond funds. That obviously hasn’t stopped the stock market from hitting records.
Shell’s article theorizes that the average investor, after going through the downturn starting in 2008, believes that the stock market can’t keep going up forever. On average, Shell writes, the stock market goes through a correction every 18 months. So far, it’s been 32 months since the last correction.
Yet, professional investors pumped $5.5 billion into U.S.-based exchange-traded stock funds.
It’s true that professional investors are accustomed to the ups and downs of the market, and have plenty of money to lose. Average investors could lose everything, and are more cautious.
But perhaps it’s more than that. Average investors are probably having to dip into their nest eggs sooner than they had planned. Perhaps they’ve lost a job, and can’t find another that pays as well. Perhaps they were forced to retire early – before they could build a sufficient nest egg.
If you consider yourself an average investor, it’s certainly OK to be cautious. It’s certainly OK to take your profits if you are not comfortable with the risk. Still, it may be unwise to let fear govern your decisions.
Sure, your investment adviser may be a “professional.” But if you trust your adviser, let him or her guide you through this time. Interest rates and inflation are still low. The hyper inflation that the naysayers predicted a few years ago has not come to pass.
Make no mistake. Interest rates and inflation can’t stay this low forever. The Federal Reserve has stopped pumping as much money into the system as it has been, which may signal rising interest rates. Rising interest rates are not all bad. If you are not borrowing money, but have cash on the sidelines, rising interest rates will help you.
In short, if your trusted adviser is telling you to stay put, it’s probably OK. If he’s recommending that you move your money, he may have an inkling that something is coming, and may be exercising caution with your precious dollars.
If you are among those who is going through an economic pitfall, visit www.bign.com/pbilodeau. You certainly won’t get investment advice, but you may find a great way to put more money in your pocket.
Obviously, the more money you have, the more risk you can tolerate. But try not to take what you believe is desperate action. Desperate action can just make a bad situation worse. Make sure you are making decisions rationally, rather than emotionally. Let your trusted adviser guide you.
No one wishes for another stock market crash. Still, they happen. But most advisers say that timing the market is unwise. It might be best to find investments you are comfortable with, and roll with the ups and downs. If it goes down, put more money in. If it goes up, let it keep growing. Most of all, follow your adviser’s guidance.
Investors operate on fear and greed. Make sure your fear is justified and rational. Try not to get too giddy with greed.
Peter