Nationwide inflation is pushing up prices and shattering confidence in Tennessee

The widespread and prolonged reach of the economic impacts of the COVID-19 pandemic continues to surprise even the most seasoned observers.

A surge in summer inflation pushed consumer goods prices up beyond expectations until the fall, when pandemic-influenced inflation was expected to decline.

It has touched everything from appliances, cars and furniture, to cotton, corn and milk.

The cost of living is still rising as fast as it did just after widespread reopening of businesses this summer attracted consumers in droves. As consumers eagerly shopped and dined, companies struggled to rehire laid-off workers and stock up despite a global supply shortage.

Since June, the inflation rate has hovered constantly around 5.4%, pushing the dollar up month after month.

The result is consumer price volatility and bitter economic projections.

Future economic growth will remain closely tied to the global impacts of COVID-19, said Laurel Graefe, regional manager of the Nashville branch of the Federal Reserve Bank of Atlanta.

“We are in a time of extraordinary economic uncertainty,” said Graefe. “There is no economic forecast that could hold if the pandemic goes in an unexpected direction.”

Each week in September, different consumer goods took turns reaching highs not seen in decades, in some cases.

Business leaders searched for ingredients and spare parts to meet their needs, amid the shortage of supply and rising costs of labor and products.

Cotton prices have broken a ten-year-old record after rising more than 40% from last year.

Corn – widely used to make sweeteners, feed and alcoholic beverages – was up nearly 40% year-on-year in early October.

Rises in the prices of building materials, metals and energy are holding up, puzzling industry leaders and policymakers in their efforts to reverse labor supply and shortages.

Commodity inflation is expected to stabilize by next year. But the rising cost of services such as child care, health care, energy and transportation is a worrying sign, Graefe said.

Inflationary increases are funneled to consumers at the same time that lower-paying jobs receive the highest wage increases in years. The longer inflation rates persist, the more prices will continue to rise for consumers.

The chaotic climate does not suit Tennessee consumers.

A Middle Tennessee State University survey of 555 residents found the lowest consumer sentiment since the quarterly survey began in 2015.

Consumers bitter about the economy

The Tennessee Consumer Outlook Index fell to -106 in September from 20 in June.

High inflation was only part of the rapid decline in confidence.

Consumers say they feel “worried, frustrated, scared, sad, upset and angry about the current situation,” the investigation report said.

“These negative feelings and the accompanying declining economic outlook were felt in all three regions of the state.”

Tennesséens were more positive about their personal financial situation and the job market than they were about the state and future of the economy in general.

But consumer confidence is a strong indicator of future economic growth since shopping is the main economic driver.

“Since two-thirds of the US economy comes from consumer spending, the declining outlook for consumers going forward can cause significant delays in economic growth,” the report said.

Dollar General, based in Goodlettsville, has joined with other so-called dollar stores in raising prices – beyond the advertised $ 1 threshold in many cases.

Profits for the chain of more than 17,600 U.S. stores have plummeted as global shipping costs skyrocket and shoppers increase their share of food purchases, which have lower profit margins than other products.

“Significant uncertainty continues to exist regarding the severity and duration of the COVID-19 pandemic, making it difficult for the company to predict specific financial results,” the August Investor Report from Dollar General said.

Variables that threaten further trade disruptions abound, including: “Any additional government stimulus payments, economic recovery, employment levels, COVID-19 vaccine status, further disruptions to the global supply chain and l ‘continued impact of the COVID-19 pandemic, including new variants of concern and any corresponding government measures such as the closure of schools or businesses. “

Businesses largely strive to stay calm and develop creative solutions to stay competitive amid rapid change and a constantly turbulent atmosphere.

“Freewheeling ghost” and other problems

One of the most pressing issues facing most industries is the lack of available skilled workers.

A large portion of pre-COVID-19 American workers have not returned to the workforce due to health concerns, shifting personal priorities, and rising costs for services such as child care and child care. transport.

Those who continue to work are, in many cases, untrained for the in-demand tech jobs that flourished during the pandemic’s stay-at-home orders.

Automakers and their suppliers, who form a significant part of the state’s economy, are bracing for another year of clogged production lines. Companies predict that the global semiconductor chip shortage will extend through 2022.

The restaurant and hospitality industry continues to be hit hard by a nationwide labor shortage. Nurses, truck drivers and other essential work sectors are also in dire shortage.

The lack of workers increases wages in all areas, especially for low-wage sectors.

But the increase in the cost of labor will be passed on to consumers and the high inflation rate is already wiping out some wage gains.

“Not only is it difficult to find new employees,” Graefe said. “On top of that, there is also now volatility in the existing workforce. If schools are closed or there is a risk of exposure to COVID-19 in your facility, you cannot rely on the staff you have expected. “

COVID-19-related quarantines and worker closures are causing a constant stream of delays in rusty supply chains.

Available workers are less willing to work overtime or take training despite wage increases, according to the Federal Reserve Bank of Atlanta.

“Restaurant owners have raised concerns about ‘ghosting coasting’, where a new recruit works for a few days and moves to the next restaurant without notice before being fired due to a lack of skills,” the Beige report says. Fed Book in September. “Another growing concern for many employers has been described as a ‘gray wave’ of early retirements, especially among nurses. “

A disturbing report from the Atlanta Fed in September found that prices rarely hit by inflation are even seeing increases. The Atlanta Fed’s fixed-price consumer price index jumped 2.6% from a year earlier.

Industry analysts are closely monitoring increases in business costs across the board for signs of long-term inflation caused by rapidly rising labor prices.

Consumer goods costs are likely to stabilize, but rising wages could trigger ongoing inflationary cycles if good workers remain hard to find.

“What I’m looking at next year, in addition to a resolution to the pandemic, is what we see in services and ultimately salaries,” Graefe said. “These things are all very closely related.

“Part of what can make going through these economic repercussions so much more difficult is that there is less of the narrative that we’re all in the same boat. Maybe you can point to a solution to that. But we haven’t been able to navigate how to increase the vaccination rate or which public health measures provide more stability and certainty. ”

You can reach Sandy Mazza by emailing [email protected], calling 615-726-5962 or on Twitter @SandyMazza.

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