“No Resistance” to Price Increases, by Wolf Richter

With the exception of global bond markets and their central bank props, the inflationary psychology is taking hold. From Wolf Richter at wolfstreet.com:

The Restaurant Industry Reacts to a Messed-Up Economy Plagued by Shortages & Transportation Snags.

These reports are coming from all directions, from small mom-and-pop operations to large corporations: Input costs are surging, wages that companies have to pay to attract workers are rising, transportation costs are surging amid driver shortages, supply chains are tangled up and there are delays and bottlenecks, and suppliers suddenly can’t deliver because they’ve run out of something, and companies are furiously juggling these issues, and they’re raising their prices to make up for those higher costs, and there is no resistance to these higher prices.

Consumers mostly just pay whatever – when before, higher prices would have entailed the loss of some customers and some revenues, which might have forced companies to back off those prices.

Chipotle Mexican Grill was the latest company to confirm this phenomenon of higher costs and higher prices, and no resistance by consumers to higher prices.

It had raised prices by 3.5% to 4% in order to deal with higher labor costs, and so far, there has been “no resistance” to higher prices, CFO Jack Hartung told analysts during the earnings call today.

Turns out, those price increases, originally designed to pay for higher labor costs, will now be eaten up by higher raw material costs and the costs associated with the staffing shortages at suppliers, Harting said, adding, “It shouldn’t be a surprise to anyone that Q3 is going to be challenged by several industry-wide issues.”

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