Inflation effects continue to frustrate supply chain processes

Supply chains abhor unpredictability, and throughout much of the past year, inflation has made unpredictability a regular occurrence, a reality that has affected how product-based businesses respond to demand from their customers as their budgets get stretched to the limit. And while inflation tempered slightly in October, it continues to handicap the economy as well as the prospect of the nation’s overall supply chain achieving some level of normalcy.

In what’s becoming a broken record, the Consumer Price Index rose in the latest monthly release from the Bureau of Labor Statistics, this time in October relative to 12 months ago. Indeed, the all items index — which takes into account the rate of consumption of nearly 90% of the U.S. population — was up 7.7% on a seasonally unadjusted year-over-year basis.

The fact that the CPI rose 7.7% came as good news to some economists, who predicted that the annual increase would be 7.9%, according to reporting from Dow Jones. However, several kinds of goods that everyone buys on a weekly, if not daily, basis jumped appreciably. These include food at and away from home (10.9% and 12.4%, respectively), gasoline (17.5%) and heating oil (68.5%), among other essentials.

Imports have slipped every month since May.

Slowing demand has diminished imports 
While the CPI was down slightly from September, consumers continue to spend vastly more now than they did a year ago. Based on a Moody’s Analytics review of September CPI data, the average household that month spent $445 more than it did this time last year, CNBC reported. Some families with the financial means are simply paying more. But many are being forced to cut back on the amounts they buy in order to stay within their budgets. This winds up creating supply chain instability for the businesses that produce the items those customers purchase, evidenced by reduced import activity, particularly among retailers. While imports reached a record high in May — with shipping ports processing 2.4 million TEUs, according to the National Retail Federation and Hackett Associates — they’ve slipped consistently ever since, reaching 2.03 million TEUs in September.

At the same time, though, Americans aren’t planning on cutting back when they begin their shopping for the holiday season. On average, they’re expected to spend upwards of $930 on gifts for their friends, family and neighbors, a survey done by Gallup showed. That’s up nearly $100 from last year ($837) and $805 in 2020.

Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation, said that in addition to high prices affecting import activity and contributing to unpredictability, businesses are also contending with an impending rail strike on the part of the Brotherhood of Maintenance of Way Employee Division. A work stoppage would add one more wrinkle to a supply chain dilemma. But the fact that so many retailers stocked up early will help attenuate what effect a rail strike would have on product availability.