Inflation and Rising Consumer Prices Hit Everyone - Is Worst Over?
In some ways, we’ve had it pretty good in the economy for a long while in the U.S. Costs of some things, such as technology (computers especially) and telecommunications, actually came down in recent years. The cost of some consumer goods, including food, stayed steady for a long time.
But in 2008 so much has changed. As the economy has slowed down, we’ve been hit with rising food costs. Restaurant and hospitality businesses are being hit — especially the lower end outlets such as pizza parlors, where the profit margins were not huge to begin with. A 500% increase in the cost of flour really bites.
One recent article says the causes of the problems are many:
“Experts attribute food inflation, the highest in two decades, to a perfect storm of ugly circumstances: A sluggish economy. Record crude oil and gas prices. A robust demand for biofuels and a subsequent decline in corn inventories. Drought-reduced harvests. Commodities speculators. And the rising demand for food supplies in developing countries such as China and India.”
When food goes up, it hits us all in the pocketbook. Even if you are not in a restaurant business, in your personal life you and your employees can’t help but be affected. We all have to eat.
So, is any relief in sight? This CNN article suggests the worst may be behind us. It suggests that the Federal Reserve may soon stop lowering rates (which actually tends to cause inflation due to a weak dollar — long story). In other words, if the Fed stops lowering interest rates, it may stop inflation. Lower inflation could be one of the best developments for consumers AND small businesses.
May 2nd, 2008 at 2:19 am
[…] seeing inflation becoming a bigger issue affecting small businesses than recession, perhaps. Inflation means that running your business costs more. What that does, of […]