Powell's cohort, Atlanta Fed President Raphael Bostic, recently admitted inflation is not transitory. This admission comes with assurances the Fed will properly manage it. We have some reservations.
The effects of rising consumer prices range far and wide. For one, the pinch rising prices put on consumers is extraordinarily disruptive. It acts like a hefty tax…eroding family budgets that are already stretched. In this ongoing stagflation, personal income gains lag far behind rising consumer prices.
Industrial materials and consumer goods companies also feel the pinch. They can pass on some rising prices to consumers. They can also absorb through lower profit margins some short term price increases. But there are natural limits to what price increases can be absorbed and passed along.
When input costs, including raw material and labor, push the costs of the final manufactured goods above what they can readily be sold for the business motive breaks down. Halting operations makes the most business sense.
One industry feeling the pinch of rising natural gas prices is the fertilizer business. As we noted several weeks ago, several fertilizer plants in the UK have had to suspend operations because of soaring natural gas prices. Here in the US we're not aware of any fertilizer producers suspending operations. But fertilizer prices are up, nonetheless.