Rising consumer prices are not going away. The latest example of this is from British multinational consumer goods company Unilever PLC who announced Thursday soaring commodity prices had forced it to raise prices the most in years.
The multinational consumer goods company that produces food, beverages, cleaning agents, and personal care products said it raised prices 4.1% in the third quarter, the fastest in seven years, pushing soaring material costs onto consumers, which compensated for a drop in shipments to Southeast Asia during COVID outbreaks.
Unilever CEO Alan Jope said inflationary pressures would linger for at least another 12 months:
"Our current view of the future is that peak inflation will be in the first half of 2022, and it will moderate as we move towards the second half," Jope said in a Bloomberg Television interview.
"We continue to take pricing responsibly, and that's in relation to the very high levels of inflation we're seeing," CFO Graeme Pitkethly told reporters. He said that inflation in the consumer goods industry is in the "high teens," with Unilever mitigating some of the inflationary impacts due to its negotiating power.
Pitkethly warned inflation could surge even higher next year, and the company would have to deal with spot prices as its hedges expire. He said 20 billion euros in raw materials and packaging costs and 3 billion euros worth of logistical costs had been impacted inflation.
Rivals, such as Nestlé warned Wednesday that "inflation costs are rising faster than we can roll forward through pricing . . . The situation has not improved. If anything, we are seeing further downsides compared to what we told you in the summer."
The effects of rising consumer prices are extraordinarily disruptive for consumers - it's almost like a tax, eroding family budgets that are already stretched thin. The worst of this is when inflation crushes the working-poor as their real wages evaporate.
The simple fact is when labor and commodity prices inflate. It becomes challenging for companies to plan future operations and production. Unilever's expiring hedges means that it may have to increase prices next year significantly.
As a reminder from the economic blog "Economic Prism," "price inflation starts with expansion of the money supply."
What this all means for consumers is that pre-pandemic pricing is gone for now. Elevated inflation rates appear to be more sticky than previously thought as the monetary wonks at the Federal Reserve might have gotten the whole "transitory" story wrong as it seems to be more "persistent."