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Prices Keep Rising: What's Happening in America

2021-10-25T18:55:32.880Z


You have already noticed that the prices go up in the supermarket and in the pharmacy. Unfortunately, there could be more impacts around the corner.


Inflation in the US is still higher than desired 0:56

(CNN Business) -

You've already noticed that prices go up in the supermarket and at the pharmacy.

Unfortunately, there could be more impacts around the corner.

What's Happening: Companies that make consumer goods are announcing price increases left and right.

Faced with persistent higher costs, they do not expect the situation to moderate in the short term.

"Inflation will continue to be a key issue for the rest of this [year] and next," Unilever CEO Alan Jope recently told analysts.

Unilever, which makes Dove and Ben & Jerry's, said last week that it raised prices by 4.1% in the third quarter to "offset rising costs for raw materials and other supplies."

He was not alone.

Nestlé, which owns the Nescafé, Toll House and Häagen-Dazs brands, said it had raised prices by 2.1% in its most recent quarter and would continue to rise as needed through the remainder of 2021 and into 2022.

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"The situation has not improved," said Nestlé Chief Executive Mark Schneider.

"If anything, we are seeing more disadvantages compared to what we told them in the summer."

The problem: It costs more to make products, as supply chain bottlenecks and huge demand for goods drive up the price of raw materials.

Higher wages needed to address labor shortages, increased shipping fees, and an increase in energy prices also add to the expense.

That puts pressure on manufacturers to charge more when they sell to stores.

Then those retailers must decide whether to pass the higher costs on to customers.

Many will.

For most of the year, economists, investors and policymakers have debated whether inflation is a temporary phenomenon that will ease as the pandemic recedes or a more permanent situation.

  • Inflation will drop to acceptable levels in the second half of 2022, says the US Treasury secretary.

Many executives are beginning to move away from the idea that it is "transitory," as the US Federal Reserve has maintained.

Remember: While JPMorgan Chase CEO Jamie Dimon said he believes supply chain issues have been exaggerated and will improve next year, most CFOs think disruptions will last "into the second half. 2022 or later, "according to a recent survey by the Fuqua School of Business at Duke University and the Federal Reserve Banks of Richmond and Atlanta.

Some central bankers are also beginning to change their language.

The Bank of England's chief economist warns that inflation could top 5% early next year in the UK.

"I wouldn't be surprised, let's put it like this, if we see inflation close to or above 5% [in the coming months]," Huw Pill told the Financial Times.

"And that's a very uncomfortable place for a central bank with a 2% inflation target."

Gasoline price hits a new 7-year high 1:06

Pill declined to reveal how he would vote at the next Bank of England meeting in early November, but said the question of whether the central bank should raise interest rates from 0.1%, where they have been since the start of the pandemic is "live".

Central banks use interest rates to maintain price stability.

Bank of England Governor Andrew Bailey said earlier this month that the central bank "would have to act" in response to rising prices.

He said he continues to "believe that higher inflation will be temporary," but acknowledged that it could last longer than previously thought as a result of rising energy prices.

Tech stocks have been on the rise.

It will last?

Tech stocks have risen and risen in October after a brutal September, when concerns about inflation prompted investors to ditch companies such as Amazon, Microsoft and Apple.

Let's back up a bit:

Wall Street, thinking that central banks could become more aggressive in their plans to reverse support for the economy in the pandemic era, increased the sale of government bonds, driving yields higher.

That hurt stocks in tech companies.

When government bond yields are extremely low, it tends to drive interest in riskier investments that offer better returns.

The valuation of tech companies is also tied to future earnings, which look less bright when inflation and higher rates enter the picture.

The concerns have been shelved for the time being.

Tech stocks have regained ground in recent weeks as investors look to the latest batch of corporate earnings.

Now, it depends on the results.

How do you explain the crisis in the supply chain?

1:55

Warning signs:

This Friday, Snap's stock plunged after the company said its advertising business was being affected by changes to Apple's privacy policy implemented earlier this year.

Facebook also warned that it could be seriously affected.

Intel shares also fell sharply after the company said its efforts to implement next-generation chip technology would hurt its profit margins for years.

One step back:

Facebook, Google's parent Alphabet, Apple, Amazon and Microsoft made more than $ 75 billion in the second quarter.

Like the five largest members of the S&P 500, if they can maintain rapid levels of growth it will have big consequences for the market as a whole.

Inflation

Source: cnnespanol

All news articles on 2021-10-25

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