NEW YORK: For central bankers wrestling with the question of whether inflationary pressures are transitory, industry chiefs around the world have a clear message: prices are only going higher. Shortages of workers, fuel, cargo ships, semiconductors and building materials as the global economy bounces back after pandemic lockdowns have companies from electric car makers to chocolatiers scrambling to keep a lid on costs.
Some of the world's biggest brands are now passing on higher prices to consumers and are warning any policymakers sitting on the inflationary fence that things are going to get worse. "We expect inflation to be higher next year than this year," said Graeme Pitkethly, finance chief at Unilever, which says its products, from Dove soap to Ben & Jerry's ice cream to Persil washing powder, are used by 2.5 billion people every day.
Unilever raised prices 4.1% in the third quarter and said they would go up again by at least that in the final three months of 2021, and might accelerate even more next year. Earlier this week, the world's biggest food maker, Nestle , said it would increase the prices of its products, which include Nescafe and Purina pet food, further in 2021 and then again in 2022 as raw material costs carry on climbing.
A long-running survey showed British manufacturers raised prices by the most since 1980 in the three months to October to cope with surging costs and labour shortages - and their cost expectations for the coming quarter were the highest since 1977.
The view from the boardroom contrasts with a more ambivalent tone among finance ministers and central bank governors faced with trying to work out when to start withdrawing monetary and fiscal stimulus without choking off the economic recovery.
STRUCTURAL SCARCITY
A draft communique ahead of a gathering of top policymakers in Washington last week called on central banks to be ready to take "decisive actions to maintain price stability". But by the end of the meeting, the language had been toned down.
Instead, the International Monetary Fund's steering committee urged global policymakers to monitor pricing dynamics closely but "look through" inflationary pressures that will fade as economies normalise.
"The key question is to know whether this is a transitory inflation or not. Nobody has a response to that key question," French Finance Minister Bruno Le Maire said last week.
Bank of England Governor Andrew Bailey has said he continues to believe the recent jump in inflation - currently at 3.1% and forecast to climb - is temporary but the British central bank is widely expected to be the first major monetary authority to raise rates in the post-pandemic cycle.
For executives at companies with a finger on the pulse of dozens of commercial sectors, such as global recruitment firm Randstad, some of the problems leading to higher prices are structural.
Randstad said on Thursday that it expected labour shortages to persist for years with older employees leaving and fewer entering the workforce. Randstad's own personnel costs jumped 3% in the third quarter as it added 2,600 full-time positions.
"We do think that scarcity is going to be structural," Randstad's outgoing Chief Executive Jacques van den Broek said. "Jobs in demand are in healthcare, education, technology and logistics."
Comments
Comments are closed.