Inflation in operating supplies widens

Price inflation for factory operating materials and supplies is starting to heat up across a wider variety of products. In the 12-mo ending July 2000, average prices for products sold by the copper rolling and drawing industry rose 7.2%.
By Staff October 1, 2000

Price inflation for factory operating materials and supplies is starting to heat up across a wider variety of products. In the 12-mo ending July 2000, average prices for products sold by the copper rolling and drawing industry rose 7.2%. Over the same period, prices for lubricating oils and greases increased 4.1%; polishes and sanitation products rose 2.2%.

Plant engineers saw some sharp reversals in inflation trends among a couple of other supplier groups. In the 12-mo ending July 2000, prices in the nonferrous wire drawing and insulating industry rose 3% and prices in the fabricated pipe and fittings industry grew 1.6%. Yet just 3-mo earlier, prices in these two industries were falling at a 0.1% and 0.4% pace, respectively.

The underlying inflationary push is being fueled these days by two trends. One, end-market demand for factory supplies continues to grow at an ever-stronger pace. That means suppliers have the demand muscle to hike their prices. Two, underlying costs are rising for everything from fuel to labor to logistics costs and imported materials. That means suppliers have the desire to raise prices.

Price/cost/demand roundup

IndustrySICAverage Product Prices 1 Change, %, During 12-Mo Ending…Apr 00Average Product Prices 1 Change, %, During 12-Mo Ending… Jul 00Direct Mfg. Costs 2 and Margins Grade Costs are…Direct Mfg. Costs 2 and Margins Grade Costs are… GradeGrowth in U.S. End Markets 3 Change, %, During 12-Mo Ending… Apr 00Growth in U.S. End Markets 3 Change, %, During 12-Mo Ending… Jul 00
Wood pallets and skids 2448 -0.06 -0.01 Falling B 2.61 2.77
Polishes and sanitation goods 2842 1.65 2.22 Stable C 3.40 3.48
Surface active agents 2843 -1.81 -0.94 Stable F 1.52 1.65
Adhesives and sealants 2891 -0.42 -0.13 Stable F 13.12 14.33
Lubricating oils and greases 2992 2.17 4.12 Falling F 8.94 10.12
Rubber and plastics hose and belting 3052 -0.21 -0.30 Rising D 6.97 7.02
Abrasive products 3291 -0.70 -0.35 Rising F- 11.87 13.79
Steel wire and related products 3315 -2.06 -1.26 Stable C 6.41 6.03
Copper rolling and drawing 3351 5.19 7.24 Rising C 26.60 32.45
Nonferrous wire drawing and insulating 3357 -0.13 2.97 Stable D 29.79 34.08
Heating equipment, except electric 3433 1.28 1.19 Stable B 4.99 4.57
Fabricated plate work, boiler shops 3443 1.14 1.11 Stable B 2.88 4.42
Bolts, nuts, rivets, and washers 3452 -0.53 -0.46 Falling D 6.56 6.17
Industrial valves 3491 1.62 1.27 Stable B 4.59 4.74
Fluid power valves and hose fittings 3492 1.92 1.83 Stable A 4.59 4.74
Other valves and pipe fittings 3494 1.51 1.20 Stable B 4.59 4.74
Miscellaneous fabricated wire products 3496 0.64 0.45 Stable C 10.83 11.49
Fabricated pipe and fittings 3498 -0.37 1.64 Stable D 4.59 4.74
Ball and roller bearings 3562 0.79 0.78 Stable B 5.78 7.14

1 Average product price changes are calculated from the producer price index for each 4-digit SIC (standard industrial classification) industry from the U.S. Bureau of Labor Statistics.

2 Analyses of each industry’s direct manufacturing cost changes are from Thinking Cap Solutions, Inc.’s proprietary Industry Cost Escalation (ICE) model. The “grade” indicates that recent price/cost changes have produced record high (A+) margins to average margins (C) to record low (F-) margins for the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs.

3 Growth in U.S. end markets data are from the ICE model and are estimates of output for the domestic end markets which purchase a given industry’s products.

All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (telephone: 360-452-6159; e-mail: ebaatz@ice-alert.com).