The only way is to go up: business leaders warn about prices
- Adds details on CBI, AutoNation, SouthWestern and Unilever investigation
- Unilever warns prices will continue to rise next year
- Randstad says labor shortages will persist for years
- UK manufacturers have been increasing their prices more and more since 1980
October 21 (Reuters) – For central bankers grappling with whether inflationary pressures are transient, industry leaders around the world have a clear message: prices are only going up.
Shortages of workers, fuel, freighters, semiconductors and building materials as the global economy rebounds after pandemic lockdowns have pushed companies from electric car makers to chocolate makers to scramble to bring control the costs.
Some of the world’s biggest brands are now passing higher prices on to consumers and warning all policymakers sitting on the inflationary barrier that things are going to get worse.
“We expect inflation to be higher next year than this year,” said Graeme Pitkethly, chief financial officer of Unilever (ULVR.L), who says its products, from Dove soap to cream Ben & Jerry’s Ice Cream to Persil Laundry, are used by 2.5 billion people every day.
Unilever raised prices 4.1% in the third quarter and said they would rise again by at least that in the last three months of 2021, and may accelerate even more next year.
Earlier this week, the world’s largest food maker Nestlé (NESN.S) said it would increase the prices of its products, which include Nescafe and Purina pet foods, again in 2021, and then to new in 2022 as raw material costs continue to rise. .
A long-standing survey has shown that UK manufacturers raised their prices the most since 1980 in the three months leading up to October to cope with soaring costs and labor shortages – and their expectations for costs for the coming quarter were the highest since 1977.
The boardroom view contrasts with a more ambivalent tone among finance ministers and central bank governors faced with trying to determine when to start withdrawing monetary and fiscal stimulus without stifling the economic recovery.
A draft statement ahead of a meeting of key policy makers in Washington last week called on central banks to be ready to take “decisive action to maintain price stability.” But by the end of the meeting, the language had mellowed.
Instead, the International Monetary Fund’s steering committee urged global policymakers to watch price dynamics closely, but to “examine” inflationary pressures that will subside as economies normalize.
“The key question is whether this is transitory inflation or not. No one has an answer to this key question,” French Finance Minister Bruno Le Maire said last week.
Bank of England Governor Andrew Bailey said he continues to believe the recent surge in inflation – currently at 3.1% and expected to rise – is temporary, but Britain’s central bank should largely be the first major monetary authority to subsequently raise rates. -pandemic cycle.
For business executives who are tuned into dozens of business sectors, like global recruiting firm Randstad (RAND.AS), some of the issues leading to higher prices are structural.
Randstad said Thursday that he expected labor shortages to persist for years to come, with older employees leaving and fewer entering the workforce. Randstad’s own personnel costs jumped 3% in the third quarter with the addition of 2,600 full-time positions.
“We believe the scarcity is going to be structural,” said outgoing Randstad CEO Jacques van den Broek. “Jobs in demand are in healthcare, education, technology and logistics.”
Wage disputes have arisen in several countries with a union in Germany, Europe’s largest economy, calling for an anti-inflation wage increase of 5.3% for nearly 900,000 construction workers.
Swiss engineering firm ABB (ABBN.S), which is grappling with a global semiconductor supply crisis, said labor shortages, especially in the United States, had affected its shipments of industrial robots, among other products.
The scarcity of chips has already hurt vehicle production around the world, causing some assembly lines to shut down.
Swedish truck maker AB Volvo (VOLVb.ST) said on Thursday that although it faces strong demand, shortages of components such as chips and freight capacity were both increasing costs and disrupting its production.
Swiss elevator and escalator maker Schindler (SCHP.S) said it was also cautious about its outlook amid rising commodity prices, soaring cost inflation and supply chain bottlenecks that were to persist.
Several US companies announced similar problems on Thursday. Southwest Airlines (LUV.N) said it expected its overall costs to rise 8% to 12% in the last three months of 2021, in part due to efforts to address staff shortages .
America’s largest auto retailer, AutoNation (AN.N), posted another record quarter revenue as car prices rose thanks to production cuts on chip shortages and growing demand from consumers turning to personal transportation during the pandemic.
Federal Reserve Governor Christopher Waller said this week that if inflation continues to rise at its current rate over the next few months, rather than falling as expected, US policymakers may need to adopt “a policy response. more aggressive ”next year.
If interest rates start to rise, however, banks will benefit from higher rates for loans.
Jes Staley, managing director of UK firm Barclays (BARC.L), said he was relatively relaxed in the face of rising prices and that an annual inflation rate of up to 4% in Britain could be positive for the bank, provided it is supported by economic growth. .
But bank staff will seek compensation for the higher prices. In Germany, Europe’s largest economy, workers at public sector banks have staged warning strikes to stress their demands for a 4.5% pay rise.
Reuters staff reports; Writing by David Clarke; Editing by Carmel Crimmins
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