Higher prices may begin to ruffle budgets soon

While the Federal Reserve Bank ruminates about inflation and interest rates, plant engineers may already be feeling an inflationary breeze.

By Staff October 1, 1999

While the Federal Reserve Bank ruminates about inflation and interest rates, plant engineers may already be feeling an inflationary breeze. In the 3-mo ending July 1999, average prices charged by suppliers of factory operating materials and supplies rose 0.3%. More ominously, the cost to manufacture these supplies jumped 1.9% over the same period. Higher costs usually precede an inflationary boost, so factory managers may want to start planning some increases in their budgets during the final quarter of 1999.

Looking at price/cost trends over a 12-mo period, we suggest that plant managers should watch their budgets for wood pallets and skids, surface active agents, adhesives and sealants, lubricating oils and greases, steel wire, and nonferrous wire drawing and insulating. In particular, budgets may be strained by rising prices for copper wire and tubing. Here, the cost of manufacturing is rising fast. Margins in the industries that produce these products, however, remain fairly healthy.