Companies adding surcharges due to material shortages

[barkley]

I've had the same credit card since 1982. No rewards then, but they were added probably about 10 years ago. I'm dinosaur when it comes to banking. I expect everything to be free, so I would not pay an annual fee for a credit card, safe deposit box, checking, checks, cashiers checks, travelers checks or notary services.

the only banking fee i pay is for the largest safety deposit box they have (took a couple of years on a wait list to snag one-people tend to hold on to them until they pass). despite owning the highest rated fire safe i keep certain original documents and copies of others at the bank.

 

[dvcgirl67]

<<political comment deleted

If we have gas prices over $6 a gallon....and odd/even rationing days....then we're back in the 1970s. We're not now, and we won't be a year from now....and OPEC is not the boogie man that certain news outlets and talk radio are making it out to be. But one can be forgiven for believing that if you're only consuming a limited news diet. OPEC's decision to not increase production has an effect, but not anywhere near the influence they once held. I'm not saying that OPEC is playing no role in this...just that it's far more complex than that.

What's happening now is that demand is ramping up all over the world after we shut a whole lot of it down. And just like literally every other industry right now, from daycare centers to coffee shops to the airline industry .....the oil producers are experiencing a serious labor shortage. They're having to pay 20% more for labor according to an article I read last week, and they still can't get all of the help that they need. That's driving prices up. They're also victims of the supply chain crunch, like the rest of us. Delays in deliveries from suppliers for all of the equipment that these fields need are delayed. That's slowing down production here...and all around the world....and driving prices higher.

Also, in another piece from the WSJ (I'll link it...but it's behind a pay wall but the headline gives the gist of it).....Wall Street is pulling the strings with respect to production shortfalls. Investors and banks aren't going to loan these shale producers as much in investment capital because a lot of these producers lose money. They ramp up production and flood the market when oil gets above $80...and very quickly the market is back below $60....and they begin to make much lower profits...or even lose money. So it would seem that the oil producers have a vested interest in finding a sweet spot where many Americans and the rest of the world... feel a bit pinched.

https://www.wsj.com/articles/shale-...t-expect-a-bonanza-even-at-80-oil-11634042534

 

[tvguy]

the only banking fee i pay is for the largest safety deposit box they have (took a couple of years on a wait list to snag one-people tend to hold on to them until they pass). despite owning the highest rated fire safe i keep certain original documents and copies of others at the bank.

I have two of the biggest safe deposit boxes. I got lucky when I got my first one, they had just drilled out the locks on boxes that had been abandoned and they turned the contents over to the Secretary of States Office. And I inherited one from my mom. No charge for either.

 

[LuvOrlando]

This idea is devolving into a runaway train.

Where exactly is all the money coming from that's fueling this thought process?

Restaurants and dining out are a luxury so poor people on the verge of homelessness aren't getting a $200 steak dinner debating over whether to give the server $40 or $50 in tip. These people are paying babysitters, rent and buying groceries. Landlords who are underwater are paying back the red that happened over the past almost 2 years, same goes for renters and homeowners. Consumers are paying down debt not buying because there isn't a whole lot of stuff to buy due to shortages so this is increasing health. All this is fueling more stability, health and growth after at least a decade of just being stuck as banks refused to lend and jobs stayed elsewhere so money hemorrhaged away from the US. Where on earth is this narrative coming from, it makes no sense.

Inflation in the 70's was caused by credit cards increasing the money supply, the stagnation came from job losses, stagflation came from the two separate things happening together. This is not that.

I suspect there is a lot of obscured employment in the 1099 Instacart/Shipt/Uber area, which probably has a lot of lag since you don't lift off the count until after you accumulated the right amount of income and if paychecks lag and reporting lags that can be very muddy. It's a tough wrinkle to iron out with the numbers and if you add tips to this, well that's a solid amount of growth, not inflation. If I had been stuck in a miserable job with a lousy boss and crummy hours on my feet all day without decent childcare and had a chance to work as I wanted, when childcare was available as long as I wanted without anyone giving me a hard time, guess what I'd be doing too?

I think this is growth and if more stuff starts showing up, as it should, things will calm down. Gotta work out whatever is happening with supply, that's the problem.

 

[Gitelfor]

Shipping costs from the Far East to the US seem to be moderating, somewhat, according to this. However, the manpower issue still remains, to get those containers in CA processed and moving to warehouses for distribution. With the backlog, even normal workforce levels won’t be sufficient to get the back-up cleared for quite some time. Complicating the problem is strong demand/hoarding.

This is a multi-faceted problem.

 

[Sinder]

https://www.washingtonpost.com/business/2021/10/15/us-economy-inflation-uncomfortable/

 

[OhDannyBoy]

A huge part of what is wrong with the system is reliance on just-in-time inventory mgmt. Due to the always-present risk of political instability, that system has always been a disaster waiting to happen, and though what hit instead was a pandemic, no one in the industry can realistically claim that it could not have been foreseen. JIT maximizes profit and lowers cost margins, all right, but it depends on a knife-edge balance of all factors, and the minute one of them goes bad the whole system collapses like a house of cards. I've been saying for years that our economy was WAY too reliant on it, and right now industry is reaping a crop of trouble that they themselves sowed.

DING DING DING!! This right here ^^

When you only stock what is absolutely necessary, when those supply chains have any hiccup it has a ripple effect on everything. Ports were closed for the better part of a year, meaning raw materials and goods were just sitting on ships and not being off loaded and shipped to factories and distribution centers that, because of JIT, only stocked just enough to satisfy demand. When demand started increasing, production and supply fell far behind. The demand to move more freight caused a huge surge of demand for truck drivers, who even before the pandemic were in short supply. So what was actually being produced sits on a dock waiting to move, much like the raw material that sat on a ship not able to be offloaded. High demand drives shipping costs up as does rising fuel costs. Making the cost of just about everything go up. And businesses that are already struggling to turn a profit now have to pay way more to stock their shelves and supply their business. So they raise their prices or think of other creative ways of recouping the lost profits.

 

[sweetpeama]

Makes people feel guilty if they don’t tip.

I REALLY would prefer they get rid of tipping altogether and just raise prices to pay the staff a decent wage.

Honestly in a lot of areas the price really wouldn't have to be raised that much. You can go into a chain resturant such as Olive Garden or Dennys in MT (no tipped wage/ tip employees must be paid the same minimium wage as any other employee at any job), WY (has a tipped wage), SD (tipped wage), ID (tipped wage), ND (tipped wage) and the price that you are going to pay for individual items on the menu are the exact same.
Most places here in MT are paying servers that have 3 months or less experience $15-$16 an hour plus their tips because people are still tipping though there are those who tend to tip 12-15% instead of 18-20% but then I have friends and family that say there are those who tip 25% and round up their bill to the next dollar amount after that so they actually average about 20% a night. There are a few single prioritor owned places and places in the smaller towns that are paying between $9-$10 an hour plus the tips which in those areas tend to be closer to the $15%. Then again I am fairly close to one of the large towns that are actually considered cities here and even the fast food places are paying $13.50-$16 an hour especially if the employee is basically available any hours the place is open and willing to work 30-40 hours a week.

As far as menus here most places are either just putting on the door that we are out of what ever they are out of that week such as chicken strips, sometimes the servers have to tell people sorry we are out of an item after they order it. Places here will use small papers on prices when they change and put them back in the protective sleeves or places are just printing single page paper menus. Very few places have QR Code menus and the ones that do have a paper option for those who don't have a QR Code or the places app.
Then again keep in mind that there are people around here like one of my uncles who just upgraded to a flip phone from a here are 4 numbers you can call plus calls to 911 jitterbug phone. Considering he is in his 80s the entire family has serious doubts on getting him up to a smart phone-forget the QR Codes.

 

[dez1978]

Things like this are one of the many reasons restaraunt prices are going up.And this is just one product, that has tripled in cost. Currently its $1.23/lb for us. We go thru 128 lb per week. Restaruants just don't really have a choice but to raise prices. However, it shouldn't be hidden or after the fact surcharges. If the cost of printing menus is prohibitive, there should be signage that is visible to everyone prior to seating that there is a surcharge or however they've decided to go about it.

When it comes to the tipping/vs higher wages talk, I never made less than $20/hr waiting tables and that was in a Golden Corral 20 years ago (min wage was 5 something/hr). I can't imagine a restaurant being able to pay all their staff enough to make it worth giving up tips. Customers would balk at the kind of price increase that would take, without taking into account the fact that without tipping it would probably even out.

 

[GreatLakes]

At the end of the day the consumer will decide if the business is able to add these surcharges or not. If we decide we aren't paying them and stop going they will have to stop charging them. If we keep going we are telling the business they are perfectly fine with us. I doubt many of these businesses are selling goods with perfectly inelastic demand.

 

[RamblingMad]

At the end of the day the consumer will decide if the business is able to add these surcharges or not. If we decide we aren't paying them and stop going they will have to stop charging them. If we keep going we are telling the business they are perfectly fine with us. I doubt many of these businesses are selling goods with perfectly inelastic demand.

The consumer will take on more debt and pay. This is why we have a bankruptcy cycle.

 

[NotUrsula]

Oh, I think that this time around, COVID is keeping a lid on most new spending debt other than medical (and perhaps home improvement, at least in the early days.) People who have money are sitting on it, because you never know when you might get laid off, or need cash flow to cover a major medical bill. I know we have been saving at a much higher rate than previously, and we're tightening our belts on everyday spending because of sticker shock on the things we still regularly buy.

Look at the the things NOT being purchased, largely because of lack of supply. We bought a sofa this year, which took 7 months to be delivered. We wanted to buy a couple of chairs as well, but decided not to bother, because the purchasing process right now is such a PITA. DH had planned to buy a car last year, but that didn't happen because of the lockdown and now the shortages; our youngest is now getting closer to being old enough to drive, so he plans to keep that vehicle for another 18 months or so and pass it to her to use. We used to eat out as a family probably 4 meals per week before the pandemic, plus lunch every day for DH. We've essentially completely stopped eating out except for the occasional drive-through sandwich or Chinese delivery, and DH, who never stopped going to the office, switched to brown-bagging, which I had done all along. I've bought only 4 articles of clothing for myself in the past 18 months, and DH even fewer; the only one we have purchased new items for with any regularity is the kid who is still growing.

The only place where our spending really grew was the grocery store, which took up the slack from no longer eating out, plus the rising cost of foodstuffs. We're falling back on old habits, too; resurrecting some inexpensive dishes neither of us had regularly eaten since college.

 

[GreatLakes]

Oh, I think that this time around, COVID is keeping a lid on most new spending debt other than medical (and perhaps home improvement, at least in the early days.) People who have money are sitting on it, because you never know when you might get laid off, or need cash flow to cover a major medical bill. I know we have been saving at a much higher rate than previously, and we're tightening our belts on everyday spending because of sticker shock on the things we still regularly buy.

I can tell you our analytics match up with this. We are seeing a large increase in savings balances, decrease in credit card balances, decrease in net new loan originations, and and increase in early pay down velocity. People are hording cash and eliminating debt. The inflation is good because it is causing some bleed off of that cash which is causing ratio problems.

 

[JimMIA]

Here's an article quoting one well-known investment advisor who thinks modest inflation will be good for the economy in the long run. His base case is 3-3.5% inflation vs the Federal Reserve's target of 2.0%.

Link: https://www.cnbc.com/2021/10/19/inflation-fears-get-downplayed-by-market-bull-jim-paulsen.html

 

[mom2rtk]

Here's an article quoting one well-known investment advisor who thinks modest inflation will be good for the economy in the long run. His base case is 3-3.5% inflation vs the Federal Reserve's target of 2.0%.

Link: https://www.cnbc.com/2021/10/19/inflation-fears-get-downplayed-by-market-bull-jim-paulsen.html

Spoken like someone who never struggled to put gas in the tank or food on the table.

 

[JimMIA]

Spoken like someone who never struggled to put gas in the tank or food on the table.

I don't know much about his personal background except that he was the chief investment strategist for Wells Fargo for 20 years prior to his current job.

His basic argument seems to be that modest inflation could be the rising tide that lifts all ships -- rather than the tsunami of runaway inflation which drowns a lot of people. It's one of those theoretical ideas that may or may not actually be doable in the real world.

 

[LuvOrlando]

Saw this and came back to add it.
Sure looks to me like it's price gouging & businesses are raising prices to increase profits and calling it inflation.
A lot of this looks like the other Martin Shkreli types of the world have concocted a great cover story. The fact that is is scaring people doesn't seem to be much of a bother, so it's BAU :/
https://www.wsj.com/articles/u-s-companies-bet-shoppers-will-keep-paying-higher-prices-11635067802
https://www.census.gov/econ/qfr/mmws/current/qfr_mg.pdf

 

[dvcgirl67]

Saw this and came back to add it.
Sure looks to me like it's price gouging & businesses are raising prices to increase profits and calling it inflation.
A lot of this looks like the other Martin Shkreli types of the world have concocted a great cover story. The fact that is is scaring people doesn't seem to be much of a bother, so it's BAU :/
https://www.wsj.com/articles/u-s-companies-bet-shoppers-will-keep-paying-higher-prices-11635067802
https://www.census.gov/econ/qfr/mmws/current/qfr_mg.pdf

How do you figure? In the first full paragraph it says these companies are raising prices to off-set fast growing costs amid the global supply chain crisis. It sounds to me that they're trying to stay ahead of those extra costs. The article also says that they're not seeing any issues with demand right now. People are still buying their products. Further down an economist correctly points out that there's still a lot of stimulus flowing through the economy right now. We have the highest savings rates we've seen in decades. There are people in parts of the country who are still benefiting from rent/mortgage moratoriums. Student loans deferments are still in effect for all federal student loans through the end of January of 2022. Millions of borrowers for student loan debt haven't been paying for months and months. I believe that the rubber will meet the road in early 2022 for these companies when everyone has to pay their bills again and we see a spike in the cost to heat/cool our homes.

These companies who are enjoying a bump in profits due to their ability to raise prices and not see a meaningful drop in demand need to be a bit more wary if you ask me. We'll see demand destruction if prices get too high. We've certainly seen this before in the energy sector. People will drive less....they'll fly less....etc. The same thing goes for companies like Proctor and Gamble and Nestle....people will buy less, or downgrade to cheaper brands. As for Verizon....people will shop cheaper plans, drop cable...etc. I'm already reading that analysts are warning over this....not just here....all over the world.

https://www.cnbc.com/2021/09/29/80-...toward-demand-destruction-morgan-stanley.html

 

[JimMIA]

A lot of very smart people have been warning that inflation is not going away any time soon, and may get much worse than the Federal Reserve is expecting. By smart people, I'm talking about Paul Tudor Jones, Carl Ichan, Jeffrey Gundlach, David Einhorn, and even Twitter CEO Jack Dorsey...

https://www.cnbc.com/2021/10/21/ban...ds-a-new-playbook.html?&qsearchterm=inflation

https://www.cnbc.com/2021/10/22/jef...cent-through-2022.html?&qsearchterm=inflation

https://www.cnbc.com/2021/10/20/pau...rkets-and-society.html?&qsearchterm=inflation

https://www.cnbc.com/video/2021/10/...o-hope-it-goes-away.html?&qsearchterm=einhorn

https://www.cnbc.com/2021/10/23/twi...he-us-and-the-world.html?&qsearchterm=twitter

And all of this is before the $4-$5 TRILLION in new stimulus Congress is poised to try to approve.

 

[mom2rtk]

A lot of very smart people have been warning that inflation is not going away any time soon, and may get much worse than the Federal Reserve is expecting. By smart people, I'm talking about Paul Tudor Jones, Carl Ichan, Jeffrey Gundlach, David Einhorn, and even Twitter CEO Jack Dorsey...

https://www.cnbc.com/2021/10/21/ban...ds-a-new-playbook.html?&qsearchterm=inflation

https://www.cnbc.com/2021/10/22/jef...cent-through-2022.html?&qsearchterm=inflation

https://www.cnbc.com/2021/10/20/pau...rkets-and-society.html?&qsearchterm=inflation

https://www.cnbc.com/video/2021/10/...o-hope-it-goes-away.html?&qsearchterm=einhorn

https://www.cnbc.com/2021/10/23/twi...he-us-and-the-world.html?&qsearchterm=twitter

And all of this is before the $4-$5 TRILLION in new stimulus Congress is poised to try to approve.

What a mess.