Forget 2% Inflation. With Margins Forcefully Squeezed, Big Companies Raise Prices, Point at Massive Inflation Overshoot, by Wolf Richter

The only thing dumber than believing that inflation is running at less than 2 percent is putting your money where your lack of brains is and buying the guaranteed loss certificate known as a 10-year treasury note. It nominally yields 1.6 percent and it’s real yield will be negative after inflation and taxes. From Wolf Richter at wolfstreet.com:

Smaller companies too: Boots-on-the-ground view of surging costs in the roofing manufacturing industry. The Fed will brush it off as “temporary,” but the inflationary mindset has set in.

Big companies, such as Procter & Gamble, have used their earnings calls to prepare investors, customers, and consumers for what is coming: Surging input costs are creating hefty margin pressures, and companies are confident they can regain their margins by passing on those surging costs by implementing large price increases. Smaller companies face the same scenario of surging input cost and margin pressures.

Todd Miller, President of Classic Metal Roofing Systems, which manufactures metal shingles in the US, sent me an email today where he goes into detail as to what his industry, and the broader home remodeling industry, is facing, in terms of surging costs, shipping issues, and supply constraints. This is Todd Miller, a long-time reader and supporter of Wolf Street:

“Our industry is dealing with supply chain shortages as well as rapidly increasing prices. While we have not had to go to this extreme yet on the types of specialized products we produce, I have seen the selling prices of “commodity-based” metal roofs increase by 30% over the last six months, with additional increases projected.

“We’re also seeing the industry-leading asphalt shingle market in a pickle. Prices are going up, manufacturers have distributors and contractors on allocation, and lead times of 30 weeks are being reported. We’re also seeing the industry cut back on product offerings.

“The end result is we have a very robust remodeling and construction market, with limited product availability and spiraling prices. Everyone is aware of the lumber issues, but we’re also hearing of major issues with windows, doors, and siding products.

“As a metal roofing manufacturer, here are some of the raw material increases we have experienced over the past six months:

  • Unpainted aluminum: up 15%
  • Unpainted galvanized steel: up 57%
  • Coatings used on our products: up 10%
  • Corrugated packaging: up 15% on average
  • Lumber for packaging: up 34%
  • Fasteners: up 5 to 8%.

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