business news in context, analysis with attitude

The New York Times writes this morning that consumers should expect prices to go up in coming months, as a receding pandemic makes it more palatable for manufacturers to raise their prices because of rising commodity costs, and retailers feel empowered to pass those increases on to shoppers as opposed to absorbing them.

According to the Times, the price hikes "reflect what some economists are calling a major shift in the way companies have responded to demand during the pandemic.

"Before the virus hit, retailers often absorbed the cost when suppliers raised prices on goods, because stiff competition forced retailers to keep prices stable. The pandemic changed that.  It created chaos and confusion in global shipping markets, leading to shortages and price increases that have cascaded from factories to ports to stores to consumers. When the pandemic hit, Americans’ shopping habits shifted rapidly — with people spending money on treadmills and office furniture instead of going out to eat in restaurants and seeing movies at theaters."

In addition, the Times writes, most retailers were loathe to raise prices because "the government was watching for price gouging, and customers were wary of being taken advantage of."

The Times goes on:  "Price increases for necessities like toilet paper and diapers will affect low-income Americans most profoundly, placing an additional burden on those already hard hit by the pandemic.

"Whether the increased prices will stick, or eventually come down, is a topic of debate among economists. Some predict that prices will normalize within one to two years, as the economy continues to gain steam, the job market improves and those who lost jobs during the pandemic increasingly return to work."

KC's View:

The guess here is that retailers will pass along the increases until a retailer a) decides to absorb the hikes and b) make a marketing and differentiating point out of the fact that its prices are lower.  Then others will do the same, and then they'll start pressuring suppliers for lower prices.

Which seems to be how the game always is played.