Page 14 - NBIZ October 2021

can celled orders, sold off inventories, scaled back produc- less worried about getting seriously ill and returned to
tion, and in some cases shut down entire factories. Retail stores, restaurants, and ballparks with hun gry appetites
invent ories, already low after the holiday shopping season, and fat wallets. They found merchants with lean inven-
fell 13.7 percent from March ’20 to June ’20 and have yet tories and restaurants short-staffed. Some restaurants,
to re turn to pre-pandemic levels. In July, inventories were unable to hire waitstaff and kitchen help, have scaled
at their lowest level in five years, according to U.S. Census back menus or reduced operating hours. It’s rare to find
Bureau data. a restaurant in Houston that doesn’t have a sign in the
window that declares “Help Wanted”.
RETAILERS’ INVENTORY TO SALES RATIO
U.S. VACCINATION AND INFLATION RATES

With fewer orders on the books, factory output fell \as
well, down 4.4 percent in March ’20 and 15.4 percent in April.
Output has only recently returned to pre-pandemic levels.
Chairman Powell views these shortages as transitory
INDUSTRIAL PRODUCTION INDEX: and expects inflation to subside as supply chain and labor
MANUFACTURING is sues are resolved. Most economists agree. Of the 62 sur-
veyed by The Wall Street Journal in July, one-third expect
infla tion to average 3.9 percent or less this year, another
third peg it at 4.0 to 4.5 percent, and the remaining third
be tween 4.6 and 5.3 percent. The group expects in flation
to mod erate after this year. The average forecast is for 3.0
percent or less in ’22 and ’23. The forecast ex cludes the
volatile food and energy com pon ents.

U.S. INFLATION RATE FORECAST
Year-Over-Year Change in the CPI

Source: Board of Governors of the Federal Reserve System

As merchants now rush to replenish inventories and Several factors could throw off those forecasts. The spread
manu facturers restock warehouses, they confront logis tical of the Delta variant continues to disrupt supply chains,
log jams and higher shipping costs as well. As of late- creating shortages of inputs for manufacturers and finished
Septem ber, 72 ships were anchored outside of the Port of Los goods for merchants. And firms, desperate for workers, are
Angeles waiting for a berth. According to The Wall Street bidding up wages. Those cost increases will eventually be
Journal, the cost of shipping a container from Asia to the passed along to consumers. Workers might start to demand
U.S. has risen between four and tenfold since last summer. higher wages. To counter those demands, businesses will
The surge in inflation coincided with the increase in be forced to raise prices. This can lead to a wage-price spiral
vaccinations. As consumers received the shot, they grew that becomes more difficult for the Fed to control.

14 NBIZ ■ October 2021