≈ The narrative for inflation is heating up. ≈
What do you get when you combine supply shortages, higher prices of raw materials, providers out of stock, plants operating at full capacity, and much longer suppliers’ delivery times? Inflation.
What would make us think such a thing? Why, the leaders of global corporations, of course!
“Given supply constraints, our in-stock suffered significantly during portions of the year.” – Walmart (WMT) CEO Doug McMillon
“…prices for key raw materials such as steel, have risen significantly over the last quarter, while freight and logistics costs have also experienced upward pressure.” – Deere & Company (DE) CFO Ryan Campbell
“…we’ve added production, we’ve added some shifts in some of our large facilities, places like Waterloo, for example, and in some of our facilities in South America as well. So, we have made those adjustments. The real challenge and Ryan mentioned this, is on the supply side, there are components and parts that continue to be tight, from a supply point of view. So, we’re managing those really tightly. Supply management group is working really hard with suppliers day-to-day, some components are week-to-week in terms of what we’re seeing from an availability point of view ” – Deere & Company (DE) Director, Investor Relations Josh Jepsen
“…it turns out actually there are limits to how Elastic Compute actually is. We got a call we never thought we’d get, one of the providers calling us to let us know that they were out of servers.” – Palantir Technologies (PLTR) COO Shyam Sankar
“…then the demand curve has just been, I — you talk about the loss of words and superlatives. Mike’s running out of things in the thesaurus here — every time we write these prepared remarks, we’re trying to figure out how else to describe what we’re seeing, because it’s — it is — it’s really something.”
“…in terms of capacity where we’re at and have been at full capacity here at our plants in Wisconsin, where we make most of those products really, since the pandemic hit…we did announce we’re opening another plant in South Carolina. That’ll be online here in the next several months. But we can’t make them fast enough. And we’re doing everything we can to supply more product into the market…There’s, there’s just a backlog of everything…Lead times are long, but we don’t see a ton of cancellations, it’s very sticky backlog. To answer your question about as compared to when we exited 2012 into 2013, after Sandy. It’s orders of magnitude higher, hundreds of millions.” – Generac (GNRC) CEO Aaron Jagdfeld
Chart of the Day
Manufacturing Input Prices Headed to the Moon
The above developments are driving input prices to the highest levels since 2011. Output prices (that is, the price you and I pay for goods) are bound to follow.
Video of the day
What this video from the Khan Academy on the basics of inflation if you need a basic overview.
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