US Manufacturers: Inflation Is “Out of Control,” Has Not Peaked, but “Intensified” amid Strong Demand, Shortages, and Lengthening Lead Times

“Efforts to stockpile” input materials to counter price increases and shortages. But finished goods inventories continued to fall.

By Wolf Richter for WOLF STREET.

The two US manufacturing PMIs released today – they’re based on the views of manufacturing executives about their own companies compared to what they saw in the prior month – painted a similar picture for April: raging unrelenting inflation, supply constraints, and strong demand.

And stockpiling of pre-production materials they could get reached survey highs to counteract price increases and shortages — a typical inflationary reaction, part of the inflationary mindset, that ends up making inflation and shortages even worse.

The S&P Global US Manufacturing PMI for April.

Amid strong growth in demand and expansion in production, Manufacturers reported that inflation in April “accelerated” and inflationary pressures showed “no signs of relenting,” amid “sharper increases in cost burdens and selling prices,” and continued shortages from suppliers with lead times from suppliers lengthening further, as suppliers struggle with “severe material and capacity shortages,” according to the S&P Global US Manufacturing PMI today (formerly the Markit PMI).

“Demand from consumers and businesses is proving encouragingly robust despite severe inflationary pressures, which intensified further during April,” the PMI report said.

“Both input cost and selling price inflation surged higher, the latter accelerating to a near-record rate, as firms faced rising energy prices, ongoing supplier-driven price hikes amid strained supply chains, and rising wage costs,” the PMI report said.

“Higher cost burdens were attributed to greater material and supplier prices, notably increased transportation, fuel and metals expenses,” the report said.

“Firms continued to pass higher material and staff costs on to clients in April, as the rate of charge inflation accelerated. The increase in selling prices was the fastest since last October.

And stockpiling of input materials to counteract price increases and shortages: “In line with a further upturn in new orders, firms raised their input buying at a sharp pace. Many companies stated that higher purchasing activity was linked to efforts to stockpile inputs amid price increases and material shortages,” the report said.

“As a result, pre-production inventories expanded at the steepest rate on record,” the report said. But stocks of finished goods “continued to contract.”

The ISM Manufacturing Report on Business for April.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment,” with five of the six biggest manufacturing industries – machinery; computer & electronics; food & beverage; transportation equipment; and chemical products – registering moderate-to-strong growth in April, the ISM Manufacturing Report on Business said today.

“In April, progress slowed in solving labor shortage problems at all tiers of the supply chain. Panelists reported higher rates of quits compared to previous months, with fewer panelists reporting improvement in meeting head-count targets,” the report said.

“Panelists continue to note supply chain and pricing issues as their biggest concerns,” the report said.

Prices expanded further in April, at a slightly slower rate than in March, but surcharges increased further, the report said.

“Inputs – expressed as supplier deliveries, inventories, and imports – continued to constrain production expansion,” as supplier deliveries “slowed at a faster rate in April.”

Here’s what ISM respondents said about their own firms:

Chemical Products manufacturer: “Tier-2 supplier shutdowns in Shanghai are causing a ripple effect for our suppliers in other parts of China. Long delays at ports, including in the U.S., are still providing supply challenges. Inflation is out of control. Fuel costs, and therefore freight costs, are leading the upward cycle. At some point, the economy must give way; it will be tough to have real growth with such pressure on costs. Despite the issues and poor outlook, business remains brisk.”

Transportation Equipment manufacturer: “Continued strong demand with improvements in the supply chain. Delays still exist, but supply issues are slowly improving. Cost increases in multiple categories.”

Machinery manufacturer: “New order entries are still very strong. Unfortunately, logistics issues have not yet improved, so lead times remain extended.”

Fabricated Metal Products manufacturer: “Due to electronic component supply chain issues, production output has been lower than normal. Backlog is growing due to the supply chain issues. New order sales are steady, except international orders are lower.”

Electrical Equipment, Appliances & Components: “Business is strong. Backlog continues to grow due to new orders and inconsistent supply chain conditions. Shortages of components are the main factor limiting our production.”

Miscellaneous Manufacturing: “The shutdowns in China due to a new COVID-19 wave are causing supply concerns for late second quarter and early third quarter. We have extended lead times to customers and are ordering product from China to cover demand through Q4 and early 1Q 2023.”

Nonmetallic Mineral Products: “Overall, improvements in supply chain are occurring on larger scale items, but we see suppliers that sell us low-volume items struggling in some cases with getting feed stocks and raw materials they need. Freight continues to plague things as well.”

Plastics & Rubber Products: “Business is still very robust. Material price increases continue to be passed on (to customers) based on costs of raw materials, logistics and labor to produce products.”

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  123 comments for “US Manufacturers: Inflation Is “Out of Control,” Has Not Peaked, but “Intensified” amid Strong Demand, Shortages, and Lengthening Lead Times

  1. polistra says:

    If stockpiling and saving become the norm, shortages will go away. The shortages come from JIT and debt.

    When a system is INTENTIONALLY DESIGNED to be instantly and totally vulnerable to every tiny delay or missing part, the system WILL collapse. Not mysterious.

    • phleep says:

      Slack in a system works as a shock absorber. One form is inventories. Imagine a car with no shocks: no tolerance for even slight bumps in the road.

      • Dan Romig says:

        I see the vehicles with dampers that leak quite often. On many occasion, when next to them at a light & stopped, I try to warn them.

        Some people know there’s a problem and thank me. Some people, and this is the best — to me –don’t know, and suddenly understand, and thank me. Some look at me like I am out to lunch (which, perhaps is true …)

        Speaking of dampers and manufacturing, Polaris just reported their earnings. “Despite paying more, the Medina-based company still could not get everything it needed, company officials said Tuesday (26 April). Issues with its bearings supplier affected production at Roseau, Minnesota. Ongoing problems with computer chips, wire harnesses and shocks (dampers) held up vehicles that were ready to ship.”

        “Steel is up 130% over the same quarter one year ago. Aluminum is up 140%.”

        They are raising prices, but margins are down 4%. Profit is down 48% in the quarter, off of $1.96 billion in sales. We make stuff here in Minnesota! Can’t make it fast enough though.

        Wolf don’t need no sled in Frisco, but these things are faster than my motorbike to 100 kph, and the Polaris Axys XCR 800 tops out at around 180 kph.

        I really can’t drive a sled in Minneapolis, but if I lived in beautiful downtown Foxhome, Minnesota, I sure as hell would have one.

        • Harvey Mushman says:

          There is a Polaris dealer about 2 miles from my work (in Southern CA). There are no snow mobiles but there are a bunch of side by side OHV vehicles. Those things are expensive, but people are buying them up like hot cakes.

        • Trucker Guy says:

          Everyone in my gated community has a 50/50 shot of having a side by side. Most of them don’t even have a scratch. They drive them to town on Sunday since you can plate them in Idaho and drive them back and spray some armor all on the tires. Parked in the drive way to show off.

          When I lived out east a lot of trail areas banned them because of how destructive they are to trails, the absurd amount of drinking and driving, and how dangerous they were to regular riders. Everyone out east I rode off road with despised them and we’d roost the shit out of them every chance we got. They are piloted by punisher skull displaying middle aged angry white guys that are too out of shape to even get on a regular quad, let alone a dirt bike. And since they have 1000cc engines and a roll cage around them, they fly down blind trails going 60-80mph.

          I may or may not know of quite a few individuals who beat the hell out of those guys acting stupid on trails getting drunk and at time killing regular riders. Glad out here they’re just used as 20k dollar pissing contests and they don’t get on the trails much.

          Personal pet peeve of mine. Side by sides should stay on jeep and truck trails. They don’t have the skin in the game a quad or dirt bike have. If they wreck, they may have to buy parts. If we wreck, we have to buy a hospital bed and titanium ligaments.

        • Dan Romig says:

          Alcohol and sleds on lakes, in the cabin county & land of ice fishing and binge drinking is a deadly combo far too often.

          It is incredible how quick a modified performance sled is in the right conditions. Hardpacked snow gives so much grip. Top speed is limited by aero and surface drag.

        • NBay says:

          Truck,
          Hit their golf course at 3am, no lites, brake disconnected and experience the TOTAL freedom of speed, jumps, power slides, with absolutely NO normal dirt bike concentration. It is HEAVEN. Run big knobbies for max grip and max “roost”.
          Just have a lot of escape plans from checking it all out first.
          I may have or may not have done it a couple times with a buddy at world famous OAKMONT and vanished into the hills of Annedale State Park.

        • 91B20 1stCav (AUS) says:

          NBay-so it MAY have been you! Kudos! (…a long, long way from ol’ ‘Honda Hill’…).

          may we all find a better day.

        • NBay says:

          I was at my Uncle’s place on the golf course at San Ramon and met two kids at the 7-11 from Dublin who turned me on to the sport. And they just had CB110 mods. We had SL350s.

        • NBay says:

          Yeah, Honda Hill or Three Faces….great hillclimb plus great motocross tracks below….and Hwy 12 never went thru. State built dirt bike FUN!

        • NBay says:

          City is talking about using all that land that was bought for the HWY 12 extension for parks, bike paths, and low income housing….I have a rough draft of it. Should be nice.

    • cas127 says:

      Actually, stockpiling in the short term is likely to make inflation *worse* – due to unusually spiked demand.

      It is nice that everybody wants virtue *now* (too late) but everybody doing it at the same time can worsen things before making them better.

      (Might want to clip thread for future reference for when DC proclaims its “utter shock” that ruinous policies of 50+ years led to gvt and economic ruin. Whocoudanoo’d?!).

      • joedidee says:

        china ROFL at dumb westerners
        wait til REAL SHORTAGES HIT

        but with price increases like this – one will do without soon enough
        1 tube silicon caulk – $6.95 dec 2021 at homeless depot
        today just $14.95
        for stinking caulk

        • NBay says:

          Not just “stinking caulk”. REAL 100% RTV has always cost a lot…It’s right up there with quality duct tape and WD-40…..can use it in pouring rain…..water and heat make it cure. I made a cool spider web out of it on rain filled upside down 50g bbl. (company used a lot of it)

          Still sounds kinda like a HD screw job…..by adding $ to shortage.

      • RemoteWorks says:

        > Actually, stockpiling in the short term is likely to make inflation *worse* – due to unusually spiked demand.

        If it keeps my stress levels super low, then inflation due to my stockpiling is worth it.

        Long term, it saves precious $$$ on massively bloated healthcare costs :-)

  2. Michael Engel says:

    If Ukraine force Madam ECB to raise it’s deposit rate from minus (-)0.5%
    to 0.00% she will do the fine tuning to the Fed, especially if US inflation will moderate.

  3. phleep says:

    Unlimited “virtual land” (apparently not yet even coded and deployed in a metaverse) is available from the Bored Apes NFT firm (Yuga labs). The rush to pay actual money for this has almost crashed ethereum. A $25 NFT purchaser was charged $3,300 in extra “gas fees” (per Mashable website). That’s a lot to pay for bragging rights and bupkis. But there’s no waiting — oh, there is?

    When troubling real assets aren’t here, why not impoverish oneself for virtual ones?

    • TheAltonRoute says:

      What is the metaverse? Just a bigger version of Farmville?

      • cas127 says:

        The Metaverse is Facebook’s latest manipulative effort to create false scarcity in order to profit off naive dingbats. See your manipulated Facebook feed for more details (well, if someone will pay FB for access…)

        • DR DOOM says:

          Can’t wait to read about (no video please) of a room full of dumb-asses with the Zuck VR Meta-Dome from his spin-off company Occulus sitting on their dumb-ass heads thrashing about and convulsing while convorting with all the Meta-Hooker encounters. Won’t take long to get that DNA out of the genome.

        • cas127 says:

          Dr. Doom,

          I believe FB may be auctioning off exclusive “pimping franchises” even as we speak.

          For a company the size and wealth of FB, the Metaverse really is a transparent stupidity.

          I think Zuck may have been badly, badly overestimated – the MV sounds and looks exactly like what you think a freshman dropout would think is “cool”.

          At 19.

          In 2004.

          It is like being told that the Sims is the Singularity.

        • NBay says:

          Beware the Occulus Vindaloop!

      • Augustus Frost says:

        What is the Metaverse?

        It’s a pretend world with some similar characteristics to the one everyone actually physically lives in.

        The difference is that the pretense of false prosperity in the real world is going to end, no matter the level of denial.

        Denial isn’t a river in Egypt but maybe it is in the “Metaverse”.

    • intosh says:

      “$3,300 in extra “gas fees”

      Didn’t they claim decentralized blockchain was cheaper and would make banking accessible to everyone?

  4. Depth Charge says:

    Do you think Weimar Boy will uncork another puny quarter point rate hike with more bold proclamations of how serious he is about inflation?

    • unamused says:

      Maybe not. Mister Market appears to be expecting no rate hike and a continuation of asset inflation. Either that or he got his lithium refill an hour before close and promptly took the whole bottle.

      If you would like to argue that Fed governors are invertebrates I will not disagree with you.

    • AK says:

      For what its worth, I am expecting 50 bps hike accompanied by the rhetoric sounding determined and confident. IMHO Federal Reserve is hoping that few quick (in 50 bps increments) rate increases coming in rapid succession will break inflation mindset, and pull inflation down.

    • RH says:

      God knows that I am not comfortable defending any of the “Federal” Reserve banksters, however, Powell cannot raise rates (unless taxes on the largest income of the US [the foreign income and “unrealized” earnings of the ultrarich hidden away over many decades in incredibly rich, GINORMOUS, hidden tax shelters] are drastically raised to at least 3%), because that would lead to a vicious circle: as interest rates paid on rolled over and new treasuries rose the payments on the approximately “$22 trillion” federal debt would rise, which would require issuing more treasuries at higher and higher rates.

      That seems to be a little secret that most media does not cover. It should be called for a “sustainable” federal budget, because we are not on a sustainable trajectory. We left the chance of a “responsible” federal budget in the dust decades ago.

      As a result of the avaricious banksters having painted the USA into this corner, I invest very conservatively, but lost 30% of the value of my investments, and I expect more losses to come. Inflation will increase and means that if you hold bonds or treasuries or cash instead, you are gifting a big portion of your savings to the banksters. They get to borrow at ludicrously low — below inflation– interest rates (e.g. at 2.5% per year), which amount to gifts of trillions of dollars of Americans’ savings over each decade through their “Federal” Reserve con to the banksters’ cartel.

      I am surprised more Americans are not furious. Due to their gigantic losses in China this year (because I predict that shell companies and other tricks will eventually be discovered to have been used by the banksters and their cronies to have their entities invest in China in Enron-like schemes for many years), the banksters and their cronies will be demanding trillions in bailouts YET AGAIN this year and the next.

      We must demand that the “Federal” Reserve become a TRULY federal agency by requiring that each entity, be it a bank or investment company or other company, that gets any below-fair market interest rate loans or other aid from their “Federal” Reserve has to give the “Federal” Reserve convertible bonds convertible to those entities’ shares worth 999.999% of the value of their outstanding shares in the respective entity.

      Then, the “Federal” Reserve should be required to convert the bonds to shares. That way, the “Federal” Reserve will eventually become a TRUE, federal agency and will own all the banksters’ banks, investment funds, etc., which it continually has bailed out or given free money (via “recapitalization” schemes) to for many decades. Like addicted gamblers, the banksters cannot resist gambling in fraud and other schemes (e.g., the Ponzi companies-schemes of mainland China.) Hence, if we just limit the bailouts in that way, the “Federal” Reserve will eventually come to own all of those parasites’ entities.

      We must only bail out the local restaurants or stores or factories or other American companies that employ tens of thousands of Americans, not banksters and not parasites like the criminals who are banksters, who use their control of the “Federal” Reserve to earn an average of millions of dollars each year per person for “work” that involves mainly inventing new tricks and schemes for sucking the financial blood of Americans.

      • RH says:

        If we just imposed a large, special tax only on parasitic entities like banksters’ banks, investment companies, and financial companies, I predict that the USA’s troubles and financial problems would slowly recede as the parasite load (of parasitic financiers) from which all Americans are suffering would slowly decrease. The financiers and banksters would then eventually turn to other jobs, which would surely pay them much less but which would be less harmful to society.

        On another subject, the banksters and financiers are desperately trying to sell off their mainland Chinese investments as the Chinese economy implodes, since the CCP’s cadres would be better off following financial advice from a horse than from their ignorant, arrogant leadership. If you buy the mainland Chinese securities in the coming years, which are the toxic equivalent of subprime secured securities in 2007, you will have only yourself to blame for your losses.

        • Augustus Frost says:

          Taxing the very small number of the wealthiest will do nothing tangible to solve anything meaningful, though it will make virtue signalers feel morally superior.

          Monetary policy should never have facilitated an asset mania. This was economically idiotic government policy. But the solution isn’t to tax this fake wealth to supposedly use it solve society’s problems.

          It’s not economically possible to transfer any meaningful proportion of the fake wealth from the financial markets into the real economy because this “wealth” is exactly that, fake.

          It doesn’t actually exist except on paper.

        • NBay says:

          Total private net wealth in the USA is $141.7 TRILLION as of June per the fed. I’d call that tangible or meaningful….what’s the diff, anyway in this context, anyway? Who has it all?

          Congress has the power to print and TAX…..neither major political corporation has had much interest in the latter for decades.

          Do you consider sharing some of that pile a virtue, or are you more interested in signaling wealth?

        • RH says:

          The “Federal” Reserve is admittedly a hybrid organization, which is owned by the owners of the Fed district banks that form the “Federal” Reserve, which Fed district banks are in turn owned by private banks and thereby, by a chain of title, owned by the ultrarich owners of those private banks. “Cui Bono” is what we must always ask. Here, the “Fed” always “coincidentally” benefits, bails out, and funds its banksters.

          Civil fraud attorneys, the IRS, FBI, some in the US attorneys’ offices, and other agencies have always collapsed cons/fraudulent schemes to their bare essentials to see who is in charge: you look at the inputs, and you look at who gets what. In the case of the “Federal” Reserve readers of this and other websites will know about its ludicrous dividends paid to its banksers for doing nothing, QE commissions, ultra-low (below inflation and fair market) interest rate loans, purchases of trillions in government guaranteed MBS (which the US congress may balk at actually bailing out by congressional action despite any guarantees, if push came to shove in every future congress considering the US Senate’s filibuster rule), etc.

          Of course, for a century, their “Fed” gave a HUGE give away to the banksters by the “Federal” Reserve’s “wunderbar” and “accidental” creation of inflation for DECADES which it created and “coincidentally” allowed to continue for so many years. Funds that they get from depositors or the Fed for which they pay 2.5% per year are effectively free because inflation is running at 7.5% per year officially, and, I opine, has been running at such a rate unofficially for years.

          The gimmicked the CPI to understate inflation to the ignorant, hoi polloi repeatedly. If are a bankster, and you borrow (at 2.5% from your precious Fed or your depositors, meaning via their average bank deposits), $100,000,000,000.00, you are getting back $5,000,000,000.00, effectively as a profit. That sum is 7.5% less 2.5% –or 5% per year of 100,000,000,000.00.

          Many may believe that is a (happy! –and very, VERY, very LUCRATIVE for the banksters) coincidence. I do not. Note that the persons that the government appoints to the “Fed” board of governors who are either connected to or very likely generously compensated or influenced to sell out Americans. Lead or Silver? I do not know.

        • RH says:

          Dear Augustus Frost,

          if you think that it is fair or reasonably that as Warren Buffett pointed out publicly, he pays a far lower portion of his (realized) income in taxes than his secretary (or other secretaries, honest bookkeepers, manufacturing workers, cab drivers, etc.,) then I have nothing more to say to you, Marie Antoniette or should I say, Mario Antionette. Let them eat cake, huh? Force the poorer 90% of Americans to pay all taxes by themselves while the ultrarich live off their work, as parasites, huh?

          NBay, you will have a treat if the proposed wealth tax were ever enacted due to its wealth disclosure requirements: with the foreign and “unrealized” earnings of the ultrarich, for just a few decades, we can pay off our measly $22 trillion federal debt. In “Britain’s Second Empire: The Spider’s Web” the total estimated money hidden in just British Commonwealth tax shelters was 55 TRILLION pounds. Trust me, the total wealth of the ultrarich actually VERY CAREFULLY hidden in all the world’s diverse tax shelters in MANY COUNTRIES (e.g., Panama, Costa Rica, Brazil, Thailand, etc.) and other schemes and holdings (e.g., mines and ranches in South and Central America, Africa, etc.) is at least six times that sum, and given the control of the US government by the ultrarich as discussed in Simon Johnson’s “The Quiet Coup” book and in The Atlantic, most of it is beneficially owned by American citizens/persons to get US government protection.

          For that reason, I suspect that the known, popular “billionaires” may be the well funded agents/servants of the secret ultrarich, which is why their schemes never fail.

      • Wolf Richter says:

        RH,

        Please don’t spread nonsense about the Fed. It’s bad enough as it is.

        The Federal Reserve Board of Governors is a “true federal agency,” and the chair (Powell) and vice chair (now Brainard) – all seven members of the board — are nominated by the Prez and confirmed by the Senate.

        The 12 regional Federal Reserve Banks are private organizations owned by the financial institutions in their district.

        This makes the Federal Reserve System a hybrid organization.

        • Mike R says:

          It’s truly unfortunate though how utterly reckless their policies have been. That Fed funds rate are where they are now, versus the bond market is absolutely insane. There are so many distortions in all markets because of the Fed. There is no price discovery on anything.

          What is bound to happen from here, is markets are going to bubble up even higher, and then the mother of all crashes, comes out of nowhere, and shaves 60% off of every single stock in every index. Even Buffet and Munger are frustrated by the casino the markets have become. They blame the wrong people though. They blame ‘wall street’ and really all blame lies with the immorality of the Fed. Eventually society will learn why what they have done is so immoral and unethical. What people see as the ‘economy’ is a total lie. It’s a distortion. Everything from food to energy to every single imported good is incredibly mis priced. We would not have all these housing manias and simultaneous 105 million people of working age, not working or not even looking. And we certainly would not be having any discussion of student loan forgiveness. The Fed itself has created this reckless abdication of responsibility by congress members, and corporate CEOs, and private households.

          A day of reckoning will come. Of that I have no doubt.

      • John H. says:

        RH-
        “ I invest very conservatively, but lost 30% of the value of my investments “

        I’m trying to figure out how you lost 30% by investing “conservative” investments. If it was by buying the 1.375% Treasury Bond due August 15, 2050 when it was issued back in 2020 (original price about 98, current price about 68), and were told it was “conservative,” then you need to:
        A) start working with an honest broker.
        B) get a new broker, if you already have one, cuz yours did you a dis-service.
        C) do some serious reading on how bond pricing works, if you’re doing Treasury Direct.

        I’m sorry for the experience/education you got, and mean no disrespect. Most of us have learned similar lessons at one point or another, unfortunately.

        • RH says:

          I said conservative, not foolish. With inflation for the past years being increased each year by US budget deficits and the banksters” Federal Reserve’s massive money creation, I did not buy bonds: most have paid less than the rate of inflation or else, junk bonds are risky and from weak, over leveraged companies.

          Sad!y, most US companies now are over leveraged. Fed interest rate hikes were foreseeable and should drive the price of all bonds down.

          Enron was only the beginning reportedly, so it is hard to trust most US companies’ financial statements now. I may be wrong as to companies that seem to be conservatively managed but since land is too pricey their stock is a conservative investment now in my opinion.

          (Precious metals ETFs are usually nasty jokes. LOL)

    • Zark Muckerberg says:

      I think this time he’ll dim the room lights and talk in a lower voice about how inflation is gonna get it this time 🪓

  5. Marbles says:

    Inventory is up,demand is still strong, and our price to sell increased 9% today. No slowdown, yet. No let up on costs either.

  6. Depth Charge says:

    I’m now seeing articles stating that the semiconductor shortage and the associated dearth of new cars on lots will not ease until 2024. So, we’ve gone from the fall of 2021 out to 2024. Globalism is a complete and utter failure, as are the POS politicians running the US.

    • YuShan says:

      A recession/ depression will solve this. Clear out the excess fake “wealth” to bring it in line with the actual productive capacity of the economy.

      • Augustus Frost says:

        Yes

        But the politicians and central bankers presumably still believe that “printing” and deficit spending are the solutions to all economic problems.

        Government has no solution to shortages because it doesn’t produce any actual wealth. It only transfers (steals) what already exists by taking it from someone who produced it to someone who did not.

        The overwhelming majority of the population supports this theft, to one extent or another.

        • NBay says:

          What a very astute observation AF!

          That’s the nature of a “Government of The people, By The People, For The people.

          You got something better to shoot for?

          You sound about ready for a massive Green New Industry!

    • historicus says:

      how about spark plugs, light bulbs, switches, printed circuit boards for things like furnaces….

      F22 parts…

  7. Harrold says:

    We have a 2001 style stock bubble and a 2008 style housing bubble. It sure will be fun (sarc) if the fed pops them both at the same time.

    • Wisdom Seeker says:

      Uhh, Harrold – When you wrote “2001”, you mistyped “1929”.

      And you left out the underlying bond bubble, the fountain generating all the other bubbles. (Mr. Bond gets really mad when he’s left out!)

      Also, what is this “if the fed pops”? The bubbles have popped, it’s just the air hasn’t all blown out yet. The housing market is last to feel the breeze but the bond market popped 2 years ago and the stock market 4-15 months ago.

    • YuShan says:

      Plus: it is truly global this time.

      In 2000, the bubble was mostly confined to stocks. And China was expanding (real actual growth). After 2008, China still had space for massive credit expansion and singlehandedly pulled the world out of recession.

      But no such thing now. Stocks, bonds, housing, they are all global bubbles now. And Chinese real estate is the biggest bubble of them all (like $60T).

      There is really no way to backstop this eventually, because there is simply a mismatch between paper “wealth” and the productive capacity of the economy that is supposed to underpin this.

      • Augustus Frost says:

        The FRB remains the most important global central bank as the mis-manager of the global reserve currency. So it can provide a liquidity backstop to all USD debtors and creditors though doing so timely is another consideration entirely.

        They can’t stop China’s real market or banking system from crashing because they can’t “print” Yuan or any other currency. Same applies in another country where “contagion” can (and will) occur, even if the FRB and US government initially succeed in keeping the US based asset mania from collapsing.

        Eventually, there is going to be an “accident” (supposed “black swan” event) somewhere in the world. Financially, it will be psychologically triggered. The supposed “reason” won’t matter.

    • Zark Muckerberg says:

      Toss in the 80’s high inflation, and Paul Volcker will rise thriller-style and gonna party like it’s 1999

  8. Gen Z says:

    Rent for a one-bedroom in a small town in Alabama is hovering towards US$1,500 a month can’t tell me that is a bubble?

    These criminals who are printing the money are creating nothing but homelessness, poverty and eroding standard of living for the working class.

    • Depth Charge says:

      Weimar Boy will snicker and pour himself another $2,500 per bottle single malt scotch. His net worth has doubled to around $75 million or so.

      • Gen Z says:

        Isn’t that sort of wealth inequality (i.e. the asset holders doubling their gains, while the working class incurring double digit inflation) the cause of revolutions and overthrowing of governments in the third world?

        Canadians here are docile that there are many who became so rich from the money printer that they are drinking $5,000 bottles for the gram while the local store bread was $5 per loaf a few months ago.

        • intosh says:

          We are far far away from revolution or gov overthrowing. Right now, for the majority who matter, the sacrifice is about whether to keep Netflix or Disney+ subscription. Restaurants are packed, planes are full, even with inflated prices. Many are actually feeling wealthier with the value of their home going up; this is true even with those late to the party who bought an overpriced home. There are plenty of jobs. For instance, demand far exceeds supply of tech workers. So, for the majority who matter, it’s not so bad.

          Also, there’d be a conflict with a foreign scapegoat long before a local revolution exits the fantasy realms.

          You need a more desperate working class agreeing to work in repatriated factories, right? Until automation replaces them. Perhaps, that’s the whole long-term plan. Only then, can we talk about a possible revolution.

        • Gen Z says:

          Here in Canada, young people have to compete for C$15/hr while rent for a studio apartment is more than C$1,500 a month, even in the countryside.

        • YuShan says:

          The Western world is still rich enough to throw the poor some bones if they have to do that to prevent a revolution.

          However, many governments in poorer countries will not survive the current crisis. Especially with genuine food shortages coming. Millions of people will have nothing to lose from overthrowing their government, even violently.

          The sad thing though: even though many of these governments are corrupt, much of it is not their fault. It is money printing by Western countries with reserve currencies that have created artificial demand at a time when the capacity of the economy was constrained. They should have done exactly the opposite (save / contract money supply when production is constrained).

        • intosh says:

          “The Western world is still rich enough to throw the poor some bones if they have to do that to prevent a revolution.”

          Very true. I think Canada govs, both federal and provincial, are now announcing left and right plans for affordable housing projects. That’s enough bone to win elections. We are far far away from any of revolution.

  9. Escierto says:

    I am an old retired guy. I buy almost nothing except food to cook at home and a little gas for the truck every couple of weeks. I know this lifestyle is not feasible for families or the young but if millions lived like I do it would cure inflation quickly.

    • Trucker Guy says:

      Financial responsibility and accountability would be nice but it also begs the question, why in the hell should the successive generation pay for crappier living standards because their masters keep blowing bubbles and popping them to transfer wealth up?

      If this really is a free country, we’d put an end to the declining financial wellbeing of the lower and middle class.

      Greed knows no bounds. They’ll keep doing it until the well runs dry and the serfs revolt. But they’ll have left the country before it goes up in flames and the peasants will fight each other for crumbs.

      Case in point, all the big whigs dumping their stocks in the past few months while the media cheers on the lackeys to BTFD!

      It’s a long ways before it truly collapses though so I just keep saving my increasingly insignificant paychecks. Gas, food, and rent soak up 90% of my expenses. Insurance and one off stuff takes the remainder.

      • Gen Z says:

        In Toronto, the average worker works for C$2,700 gross a month, yet rent for a one-bedroom is C$1,700 a month. These asset holders then tell us to get roommates while they hoard houses to rent for insane costs.

        It’s a system ripe for a civil unrest. Wages are not going up in Toronto for the many compared to the top earners.

        There are top earners who get over C$100,000 a year, and then there are the average workers who get at most C$30,000 a year with increases barely covering inflation.

        • NBay says:

          Yeah. I had a LOT of hope for the Occupy Movement, but the cops threw them out of rich neighborhoods (like Dimon’s) and off Corporate property, even the public paid for streets adjoining it.

          “Civil government, insofar as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor.” -Adam Smith

    • unamused says:

      “if millions lived like I do it would cure inflation quickly.”

      Millions already live like you do. Billions more wish they could but the planet can’t keep up with production.

      Inflation increases poverty. If poverty decreased inflation you wouldn’t have any inflation.

      • RockHard says:

        That’s an excellent point. We could all go back to being peasants digging in the dirt. Over half the planet is doing it now. Join the majority!

    • Flea says:

      I live the same lifestyle pretty relaxed

    • Gen Z says:

      I shop at a discount store (No Frills) and I see elderly women with walkers being hesitant to buy 50% discounted stale bread at the discounted section due to cost.

      They didn’t own a home, and thus, they suffered in the post-COVID money printer economy.

      • YuShan says:

        In my supermarket there is a shelf with heavily discounted food that is about to expire their “use before” date. Previously, there wasn’t much interest for it. But in recent months people are sometimes almost fighting over it when it is topped up with new items (usually between 2-3pm).

      • Nicko2 says:

        I only buy organic. However, I also don’t eat a whole lot of red meat or dairy. I do like quality cheeses. Smoked salmon, organic coffee? Yes please. It’s all about moderation. Learn to cook, stock up on quality food when it’s on sale, invest in a deep freezer. No need to live like a hobo.

        • Gen Z says:

          What tone deaf Boomer thinking Like if a senor widow on a fixed pension living in an apartment can afford to buy a deep freezer.

        • NBay says:

          Agree Z. Makes me ashamed to be a boomer, like others here, but I assure you I don’t eat or live like he does….nowhere near, I’m sure…..in fact I have been running a 500-1500AD European peasant diet for ten years now and am doing fine at 75. It’s how most of our bodies are adapted to eat….except I use Skippy instead of lentils.
          Tip: By law, “peanut butter” must be 90% peanuts, but beware when it says “peanut spread” or whatever….could be anything.

  10. Norths says:

    Gee, if interest rates were close to zero and inflation was well above 5% I’d stockpile and then stockpile some more…..until I couldn’t because interest rates actually went up.

    Stockpiling is a no brainer or trade that fuels inflation and only stops when interest rates normalise

  11. unamused says:

    As inflation progresses demand will slacken and shortages will abate, and then the recession will worsen. So there is a light at the end of the tunnel, but unfortunately it’s an oncoming train.

  12. Swamp Creature says:

    I noticed a shortage in Coffee cups around here. Not one grocery store or other big box store is selling them. Did find one about two weeks ago selling them without lids. What the hell in going on? Is there some new regulation about plastic coffee cup lids? This is crazy.

    • Harrold says:

      Stop buying things that you use for 5 minutes and just throw away. Within minutes of where I live there are 3 stores that sell used mugs. My friend asked me for a quarter. She came out with a set of stainless steel spoons that she uses instead of a throw away plastic spoon.

      Recycle rather than waste.

    • Harvey Mushman says:

      Yeah that’s interesting.
      I’m a boring guy, I eat plain oatmeal, plain (non flavored yogurt), non-flavored sparkling water, etc. Those items seem to be missing from the shelves often these days. But the sugary flavored oatmeal, yogurt, and sparkling water is always in stock.

      • NBay says:

        Reminds me of another tip: Learn the difference between the “Whole Grains” and “100% Whole Grains” labels. Might as well stay healthy till unamused is proven correct.

    • andy says:

      That is painful to hear. Perhaps substitute with paper tea cups?

  13. Winston says:

    APR 29 2022 – Intel CEO now expects chip shortage to last into 2024

  14. historicus says:

    Cantillion Effect…
    it is really that simple, IMO.
    Pump the money supply by as much as they did….keep interest rates at near zero….
    This is Econ 101, chapter 1…
    but all the theories and excuses cloud the reality of what happened..
    TOO MUCH MONEY CHASING TOO FEW GOODS.
    IMO.
    Powell screwed up. The Fed should not have the power to expand the money supply beyond the demand pull of an expanding GDP. IMO.

    • Flea says:

      Then u can’t give loans to businesses that are forgiven =corruption also you ever notice that rich people, call J Bowel a genius saved there ass ,SIMPLE

      • historicus says:

        We werent wrong
        The theories we chose were wrong
        J Yellen

        How absurd to place important decision making in the hands of those who pay no consequence for being wrong
        T Sowell

    • YuShan says:

      On average, money supply shouldn’t grow faster than real GDP.

      • historicus says:

        You mean 40% in two years was too much?/s

      • Augustus Frost says:

        There isn’t a universally accepted definition of the money supply. Most “money” is actually debt, like everyone’s bank account which isn’t a deposit with a bank but a loan to a bank.

        There is no formula for “managing” the money supply that will lead to long-term price stability, certainly not with the current modern fractional reserve lending financial system which is actually designed to fail. Yes, you heard that right.

        The distortions build up over time through a combination of mostly government created moral hazard, imprudent lending, and reckless speculation. Then instead of the recurring “depressions” which occurred pre-1913 (like the Panic of 1907), there will eventually be a “fat tail” catastrophic systemic failure at a future undeterminable date with all the disastrous economic, political, and social consequences that go with it.

        The financial system was mostly in balance up to 1971 despite recurring government deficits but since then has completely gone off the rails starting around 2000.

        I attribute it to a combination of a belief in magical thinking (something for nothing) and attempting to use “bailing wire and chewing gum” to keep society from falling apart.

        The cultural and economic rot is extensive and there is no way to avoid the consequences.

    • NBay says:

      Econ 101 is bonehead Econ.

      Didn’t anyone take Econ 1A, you know, pre-req; Calculus 1A completed or in progress?

      (not me, hate Econ)

  15. Phoenix_Ikki says:

    Thank God none of these Jacka$$ at the FED or Pussboy Powell is a ER doctor. Can you imagine their approach as a ER doctor? Imagine a patient walked in with a fatal wound, first he will try to convince you that fatal wound is transitory and you can just sit it out and when that’s not working. These genius will proceed to give small dose of painkiller to a giant gaping wound and hope it will solve the problem…

    I guess you can only get away with this level of incompetence when things move slower and harder to draw a direct relationship to outsiders.

  16. Random guy 62 says:

    Small/mid sized truck equipment manufacturer in the American Midwest here.

    It took over a year of hiring and overtime to burn off our backlog that shot to the moon in the first half of 2021. Some due to labor shortage. Mostly due to lack of components. Lead times on key components are still laughably long. Things that are usually 5-10 weeks are now 40-50 weeks. We had guys from the office building product to dig our way out and get the backlog current, myself included, last fall.

    Steel and aluminum prices were looking like relief was on the horizon only to reverse back to record highs. Our product prices are 30-50% higher than they were a year ago, and need a go a little higher as our margins are still weak. We are bumping up against a price ceiling because our two largest competitors have foreign manufacturing and therefore lower cost structures. Commodity costs are driving our prices higher than theirs, and we are losing business because of it.

    We are self-insured and healthcare costs are absolutely killing us. These ebb and flow historically and we are in a bad patch for two years now. Actually only one Covid hospitalization for a few days but it cost $90k and hit stop loss of $75k. Knee replacements…cancer treatments…anxiety medication…skin conditions… you name it. Our country’s medical system is a joke, but that’s a different blurb.

    Recently we have seen a fair amount of delay and cancellations on orders. Backlog is still historically strong, but it’s so spread out that we are struggling to ship enough to stay above breakeven now. Just laid off a small round of folks to match the workload. We are only a few bad order weeks away from more layoffs, cutting into white collar jobs next time.

    We just had to push a bunch of work from June until TBD because a shipment of components is severely delayed. Some things are not easily substituted.

    Things are a little better than they were six months ago, but we expect this latest China shutdown to cause a few more problems soon.

    We need a recession to correct this mess, but it will be very painful for us. If it happens in the next few months, we will have to cut aggressively to stay afloat. My butt will be in the shop again for sure. Government cheese kept those deep cuts from happening over the past two years, but we expect they are done for quite a while given the mess all the overstimulation made last time.

    • Alex says:

      When the recession hits, all these firms that ordered excess inventory to cope with backlogs will cancel those same excess inventory orders. Ever see what happens when everyone (producers) cancel(s) orders at the same time? Of course you did…in Mach of 2020!!!

      Once all these raw materials orders used in production are cancelled the manufacturing plants will lay off workers and cancel their input orders. Then when prices moderate and the FED intervenes (reverses tightening rhetoric) consumers will start buying goods again…then it gets real fun because there won’t be any goods to buy…and when consumers bid up the price of goods then you get to see the culmination of inflation, supply shocks, FED ease, and currency crises join in for a mega dislocation.

      You can’t eat gold, or bitcoin…and you will trade either one for water and food. And for those living in a city, you have my condolences. Those in rural areas that don’t know you neighbors, you may survive but you won’t thrive. You may have meat, but your neighbors have water. You may have veggies but your neighbors have coffee…etc.. Farmers will be your best friend.

      Don’t be an island. Get to know people in your neighborhood…in three years you will be the one sighs relief. Start relationships with local farmers now! But from them now when you don’t need them but they benefit from you…later they won’t need you but you’ll benefit from them.

      I don’t predict anarchy, but privation. Inflation will mean that stocks and housing prices will be higher but not wealth. What does it matter if you bought a home for $450K and it is worth $2M but a dozen eggs cost $50 if you can get it? If gas is $12/gal and your home is worth $2M and you commute 40miles one way to work in a car with a V8, I’m saying you’re not better off. Stocks will trade at higher prices but again the price increase is nominal…it’s a worthless dollar in that future. I

      In Zimbabwe having a Million in the bank is nothing…I’m not saying we go that far down but folks will still have hope…those with farmer friends will have food.

      Good luck with your gold, bitcoin, dollars, 401k’s, etc…I’m looking for a community collective and not the hokey kind, the “we’re in this together kind”. Let’s ven diagram our strengths and invite others in that will help us all grow.

      enough of my ramble….

      • Nicko2 says:

        Ugh…. Dollar hitting 20 year highs; King Dollar rules all.

      • Random guy 62 says:

        I have a certain level of room for this take on the future in my head, though I try to not be too pessimistic.

        It occurred to me the other day just how close we could be to this scenario right now. I have several friends in power generation. Some in nuclear. Some in solar and some in wind…

        Our conversation the other night turned to how slim some of their stockpiles were of transformers and other components needed to keep the electrical grid working. And lead times on replacing them were long too. That may only be one small pocket, and I am not aware of this being a widespread problem, but it got us thinking…

        Imagine how easy it would be for the economy to collapse if the utility companies couldn’t get the parts they need to fix the system quickly enough. So much other production is completely dependent upon electricity so it would cascade to other industries within days. Imagine the Texas freeze, but across the whole country, all because some grid-critical widgets are stuck on a boat somewhere.

        All I know is we send everyone home at work if the power goes out. We are helpless without electricity. We’d wing it at home, but that doesn’t cut it for long.

        I would love to hear some perspective from some more folks in the industry to see if we are anywhere near problematic shortages in the electricity production space.

        • VintageVNvet says:

          rg8:
          The entire electrical system is an anachronism and needs to be replaced with local production and distribution.
          While the possibility of a CME wiping it all out is the most likely IMO, there is also the potential targeting of the ”grid” part by evil actors, since it is very clear NOW that a high altitude EMP could/ would due damage that will take an estimated 5 YEARs to repair, and that only IF component parts are available, which your concern about is exactly correct NOW.
          Small local power plants prevailed for years, at least in the parts of USA that I have been in since the 1940s, and should be the intent of all our ”infrastructure” design and construction going forward and ASAP.
          These should be a combination of ALL sources from the most efficient ”non fuel” to the most reliable, including ”gravity” and nuclear and petrofuels.
          Will USA do so, very unlikely UNTIL there is a CME or similar,,, many things will change instantly at that time.

        • RedRaider says:

          Here in central Wisconsin the grid I’m on is local and very old. They can’t order parts anymore. Each repair is a custom job. I would guess I lose power up to 10 times a year. It’s basically weather related downtime. And it can last anywhere from 10 minutes to 10 hours.

          When I lose power at night I just go to bed. No biggie. One adapts. No collapse of civilization. I think that happens when I have power for one hour a day because of planned outages. And if you live in a big city, well, err, uhh…

        • TheAltonRoute says:

          Power has gone out here a few times. Customers come in and want to pay with a card. The wonders of the cashless society.

        • 91B20 1stCav (AUS) says:

          Alton-when i was still at the moto shop in the ’90’s&aughts, we kept an old-fashioned card slider and carbon forms for power outages, and could still do business. Today, though, there’s no impressed numbers on cards (don’t know if the forms are still around/valid to write card info down on…).

          may we all find a better day.

    • Alku says:

      Random Guy –
      Many thanks for taking the time to share this!
      I love reading such first hand insights. Priceless info
      (As opposed to yet another bashing of the FED :)

    • Felix_47 says:

      Some things should be nationalized……health care, for example. As long as it is a profit oriented business expect nothing better. It will only get worse. The legal system and medical system are killing this country. We could adopt the British NHS system and simply fund it better. They have had 90 years to iron out many of the problems.

      • NBay says:

        Yep. And it should also be a triage system. If triage is good enough for our Military, it’s good enough for for rest of us. And wards instead of private rooms, also just like the Military….if that upsets you, maybe your health problem isn’t all that bad? That has been discussed here before when someone was complaining about the Canadian system.

        • NBay says:

          In fact Gandalf (who is a Doc) was describing the German National Healthcare Service here. He said, “To put it delicately, let’s just say they don’t try to keep grandma alive at any cost”.

    • Random Guy 62,

      We do not need a recession to deal with cheap foreign competition.

      We need Capital Transfer Securities.

      Link in name above.

      • Random guy 62 says:

        Will check it out. Dealing with foreign competitor is another matter. I merely mean to deal with all the shortages.

  17. Anthony says:

    We keep hearing about the difficulty of building cars because of the shortage of “chips”. That’s not strictly true, as some of the comments above state clearly. There appears to be shortages of almost everything, which means all production will start to be delayed, for as we know, you can’t sell a new car that doesn’t have light bulbs or a missing brake cable..(or whatever)

    The last minute delivery system was always going to fail and here we are, living in the new, “five minute late world….” This is the world of inventory and warehouses and yes, it sounds so old fashioned, almost Back to the Future…..well, that’s where we are, with our 1980’s inflation….

  18. Kenny Logouts says:

    I don’t get it.

    Surely there is a massive opportunity out there for miners, refiners, raw material providers, to feed into all these industries at these new higher prices that can be passed on?

    Markets will fix all this.

    Unless it is all indeed transitory.

    FOMC will be the acid test. Double rate rise and it means they intend to trigger a bigger correction in asset prices and cause a recession.

    These stockpiles will be crushed by their inventory next.

    • Kenny Logouts says:

      Stockpilers*

    • Nicko2 says:

      Mines and refineries are good….how long does it take to get an operation up and running? Years.

      • Anthony A. says:

        It takes 5 – 10 years to get air emission operating permits to even start construction on a new refinery, if you can get them at all. Besides going through the state permitting folks you have to go through the federal level ones and also fight all the “save the earth” loonies along the way.

        You can’t just build a refinery anywhere; you need lots of electrical power availability, pipeline access, rail sidings to mainlines, and maybe a deep water port if you are planning on receiving and shipping raw materials and products by tanker.

  19. Michael Engel says:

    This report is a treasure hunt : small/ mid size US mfg will replace
    China, enhance productivity. Get them now.

    • Kenny Logouts says:

      In the UK Liz Truss has been lambasting China, threatening them with the same treatment Russia has had, all because China wish to remain neutral.

      We’ve had news analysis saying Russia’s war has ended the time of globalisation.

      ESG investing coming into vogue, with a huge and ever-evolving “E” allowing government to direct investments as they wish.

      It feels like BRICS will be a liability if you have them in your business.

      But then Taiwan and TSMC, and China… hmmmm. I’d be investing in chip makers not in SE Asia.

  20. dr_doomz says:

    It’s always great reading the inflation stories here on wolfstreet.com, going way back to 2019 even, when many deflationists stood tall and proud. With that said, no one seems to understand what’s really causing the inflation. For the last two years I continue shaking my head thinking, when will they get it, if ever!? There are several factors, but I’ll give you a hint on the biggest: think of lot’s of money, landfills, and deep blue seas. Now use your imagination.

  21. Nicko2 says:

    Also don’t forget about Climate change! Record droughts in Indian Subcontinent/ southwest USA/Brazil….. record flooding in parts of Canada and central USA, war in Ukraine; all of it a recipe for inflation.

  22. Winston says:

    Intel CEO on 29 Apr – chip shortage will likely continue through 2024.

  23. Nemo 300 BLK says:

    Last year we had serious raw material shortages such as resins and isocyanates but we are in great shape now.

    There’s a worldwide black and white pigment shortage, but we have pallets of those pigments so no worries there.

    Now, our corrugated supplier, who has increased their prices by 80% in the last 18 months, says there’s a recycled corrugated shortage to make the boxes we ship in. Luckily, they were able to fill a truckload order of ours last week. We don’t use run-of-the-mill Amazon or Uline boxes here so a box shortage can be a real concern.

    And I’m still waiting on an F250 I ordered last Fall. I removed two options (spray in liner and adaptive steering) per the dealer’s suggestion so it might show up before the end of this summer as a 2022 MY.

  24. anon says:

    Wolf,

    You fail to answer the most IMPORTANT question …

    Are US manufacturers using the proper pronouns?

    VBG

  25. Wisdom Seeker says:

    Title Typo: “US Manufactures:” should be “US Manufacturers:”

    ??

    Although, “US Manufactures Inflation” would also be an appropriate title… seems to be about the only thing the government has been doing “successfully” lately.

    • 91B20 1stCav (AUS) says:

      WS-it may be a case of ‘two great nations divided by a common language’ (US-UK per Churchill). Have seen ‘manufactures’ used in the past referring to the entire manufacturing class.

      (akin to the ‘home-in’/’hone-in’/’hone-out’/’hone-to’ usage debate, perhaps…).

      may we all find a better day.

  26. Benny J says:

    Maybe I’m not smart enough but what I got from the article is that the US is willing to pay any price for materials and products from China, because the Western consumer is willing to pay for it. ie. with all the “free” money that was given away.

    Sounds like a great deal for Asia (China in particular!).

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