Inflation Is Back - Protecting Against Materials Increases
It is important to have an eye on the risk of inflation, if you want to be safe when it comes to getting paid. If the prices for raw materials and basic stuff are going up and up, the producers have to adjust their prices accordingly.
Some providers are protecting their risks against rising commodity prices, by adding commodity surcharges. Or they are reserving the right to increase prices with short notice in the event their costs have increased.
The Economist states that the “double-digit price rises are about to afflict two-thirds of the world’s population.” Here is an excerpt from the article, Inflation’s back.
Taken as a whole (and using official figures), the average world inflation rate has risen to 5.5%, its highest since 1999. The main cause has been the surge in the prices of food and oil, which briefly soared above $135 a barrel this week. But Mr Trichet’s concern is that higher headline rates could push up inflation expectations, leading to bigger pay demands, and so trigger a wage-price spiral, as in the 1970s. Central bankers’ mistake then was to hold monetary policy too loose, so that higher oil prices quickly fed into other prices. So it is worrying that global monetary policy is now at its loosest since the 1970s: the average world real interest rate is negative. (Economist, May 22, 2008.)
Does this apply to you? Have you added commodity surcharges to your invoices? If that is the case, how are reactions from your customers?
