This morning, Americans got the startling news that inflation has hit 7.5% in the U.S.
Price hikes are not just impacting gas and the food staples you buy at the grocery store, but just about everything—and prices are going to continue go up, unabated, throughout 2022.
Starbucks was one of the first U.S.-based companies to announce, in its quarterly earnings call, that it is hiking menu prices to offset inflation.
Starbucks already lifted its prices in January and October of 2021, and it did so again, days after its Feb. 2 earnings call.
Starbucks did not respond to an inquiry from Newsmax Finance about how much it is raising prices, but Starbuck’s website says a venti cappuccino costs $5.25; a tall latte with no frills, $2.95; and a grande latte, $3.65, plus taxes, of course. A trip to Starbucks is going to cost at least 20 to 30 cents more.
With margins already thin; many fast-food chains, including Starbucks, are raising hourly wages to retain workers amid the labor shortage. The global supply chain is still an issue, and the latest variation of the COVID-19 pandemic has mutated into omicron, upsetting the labor market even further.
Due to these major forces, it appears that runaway inflation has nowhere to go—but still further up.
Likewise, major U.S. consumer goods and food giants, Procter & Gamble (P&G) among them, are unabashedly announcing that they, too, plan to pass higher prices onto the consumer—not just once, but multiple times in 2022. P&G also did not respond to an inquiry about the percentage by which its prices are going up.
From Hershey, to Clorox and Kleenex maker Kimberly-Clark, companies are boosting prices further and more broadly than previously announced—signaling that the current 7.5% inflation in the U.S., the highest in 40 years, may not ebb anytime soon.
In fact, some economists and analysts are even warning of a wage-price spiral.
In normal years, product makers discuss price increases for the upcoming year at the close of the previous year. Company execs are now telling investors and analysts on their earnings calls that they will be increasing prices aggressively, and multiple times, throughout 2022.
‘Extreme Level of Cost Inflation’
Clorox is “having conversations with retailers” about “an extreme level of cost inflation,” said CFO Kevin Jacobsen. “We stand prepared to take more pricing [action], if necessary. We want to see how inflation will play out this fiscal year. I think it’s going to take several years for us to rebuild margin” to pre-pandemic levels.
Hershey already said it will raise prices in the first quarter ended March 31, 2022. It now says it will extend price hikes through the second quarter, and that even with these price increases, its profit margins will fall.
Kimberly Clark, Chipolte, Cadbury Chocolate and Mondelez International (maker of Oreo cookies) are among many other leading companies announcing “multiple pricing waves,” as well.
Kraft, Heinz, McCormick & Co., Campbell Soup and Colgate-Palmolive have announced that their margins are taking a hit, so it would not be illogical for them to increase their prices, as well.
58% Price Hike ‘Sticker Shock’
U.S. companies are bracing for consumers’ reactions to steep sticker shock, with Colgate CEO Noel Wallace and execs at McCormick and General Mills admitting they expect sales volumes will fall off when shoppers start seeing surprisingly expensive prices in stores.
The first, and perhaps most impactful, price increases that Americans began seeing over the summer were for gas and fuel. According to the Pew Research Center, citing U.S. government data, gas has risen 58.7% to $3.49 a gallon, up from $2.20 in November 2021.
Why does this matter? The average driver uses 570 gallons of gas in a year, spending roughly $2,000.
Inflation bumps up that cost to $3,200. Especially if we're hit with a harsh winter, heating a home can also increase fuel costs by hundreds, if not thousands, of dollars.
Last fall, President Biden originally echoed Fed Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen by dismissing inflation as “temporary.”
Since then, Biden, government officials and economists have reluctantly admitted that inflation is a challenge that will be on the scene for some time to come.
White House spokeswoman Jen Psaki said on Feb. 8 that the U.S. government is in talks with both oil-producing and consuming countries to tackle high oil prices, adding that "all options are on the table."
"With oil-producing countries, we’re talking about proposed production increases," Psaki told reporters. "With oil-consuming countries, we're talking about releases from strategic reserves."
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