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What Phila. Fed survey has in common with food riots

Philadelphia Business Journal – by Sonja Sherwood

The Philadelphia Fed issued its Business Outlook Survey of regional manufacturers today and it contained some sort of good and some potentially very bad news.

First, the index of current activity faltered slightly from the previous reading, to 19.3 this month from 20.8 in December, but even with that miss, overall the report was positive on economic growth. New orders were up for the fourth consecutive month, and shipments improved.

Here’s the part that bothered me. Again, manufacturers are reporting widespread higher prices, both for materials they use AND for their end products. I have kind of a quaint belief that if economic recovery arrives in lockstep with inflation, you’re really paying for the recovery out of pocket. Companies have already been stealthily shrinking their packaging while charging the same prices for household products and food and we’re in the 18th straight month of commodity price increases, according to the Institute of Supply Management’s index.

More than a quarter of the manufacturers in the Fed survey said they’d raised prices on their own goods (versus 9 percent who lowered them). Some are probably making up for declines they had to absorb in 2009, but there’s no denying that commodity prices are surging everywhere. Once manufacturers feel comfortable passing along those price increases, inflation is out of the box, as protesters in Algeria, Tunisia, India, Bangladesh, Indonesia and soon many other countries will tell you. Here’s a photo essay on what happens when people can’t afford their grocery bills anymore.

Inflation is like tribbles. At first they have a soothing effect, but then they eat after midnight and soon your entire pantry is bare. Or is that gremlins. Whatever, it’s a phony prosperity.

source: What Phila. Fed survey has in common with food riots | Philadelphia Business Journal

Editor’s Note: If your parents or grandparents had a food pantry in their houses, and you  wondered why, it’s because they lived through the great depression. Six months to one year supply is the norm. Now would be a good time to start your supply. If you don’t, you will be in line with your ration card taking what they are giving.