NORMAN — With inflation exceeding 5% for the fourth consecutive month, business owners in Norman say their concerns are increasing along with their cost of operating.
According to the monthly report from the U.S. Labor Department, the annual inflation rate for the United States is 5.3%.
The inflation rate reached its highest point in 13 years in year-over-year growth in June at .9% and consumer prices are expected to continue to surge by 5.1% during the fourth quarter, according to the National Association for Business Economics.
Experts are now pulling back on their forecasts for economic recovery from the effects of the COVID-19 pandemic, according to the Federal Reserve’s growth forecast.
“It hasn’t really affected the amount of business yet, but it will, because people’s paychecks aren’t going up with the prices,’’ said Bobby Patterson, manager at Ellison Feed & Seed.
Robert Dauffenbach, senior associate dean of economic development and impact at the University of Oklahoma Price College of Business, cites a number of factors that result in consumers feeling the inflation in their wallets, including supply chain adjustments.
“There’s great disruption in supply chains, and that is seen by congestion at ports, where ships aren’t able to offload their cargoes, and we’re also seeing the shift away from China, who was the main manufacturing place in the world,” Dauffenbach said. “There’s been a shift to Vietnam and other places, largely here.”
Dauffenbach said another reason for the increased price of goods is an inflated stock of money due to Federal bond buying programs designed to incentivize consumer spending with low interest rates. Last month, the Federal Reserve announced the central bank will soon pull back on their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage-backed bonds.
The Federal Reserve anticipates an inflation decline over the next year, reaching 2.2% by the end of Q4 2022.
Dauffenbach said reaching an inflation rate under 3% will require a significant ramp up in the supply chain. He’s concerned that won’t happen at the pace national experts are forecasting.
“Ultimately, I feel like we don’t take stock of some of our historic [economists] like Milton Friedman, who said ‘inflation is always and everywhere a monetary phenomenon,’” Dauffenbach said.
In Norman, the increased cost of goods and materials is affecting the way many businesses receive their products and how they price them. Terri Carmichael, co-owner of Top Dog Pet Resort, said she is paying 5% more for dog food and treats since the spring.
Carmichael said ownership circumvents this increase by shopping for deals and maintaining flexibility when selecting a brand.
“We try to go to Sam’s and buy in bulk,” Carmichael said. “Typically, they will have $4 or $5 off different brands, so I just get what’s on special and shop wisely.”
Dena Deveraux, manager of Copelin’s Office Center and Kidoodles Toy Zone, said prior to the pandemic, vendors would change their prices once a year. She is now seeing price increases with every order she places.
Deveraux said she also sees suppliers change their freight policies, adding costs to the inflated price of products.
“They used to give free freight if you purchase [a certain] amount, and they have thrown that away, so we get to pay the freight and they won’t ship the entire order,” Deveraux said. “We’ve been encountering that since COVID-19 started, but it’s happening more and more.”
The price of food has gone up, too. According to a Producer Price Index news release summary released monthly by the U.S Bureau of Labor Statistics, the index for processed foods and feeds rose 2.1 percent.
For the 12 months ended in August, the index for processed goods for intermediate demand climbed 23%, the largest 12-month increase since February 1975, the summary states.
Jennifer Blackburn, owner of Cellar Wine & Spirits, said imported goods such as French wines, liquors, scotch and Irish whiskey have increased in price the most. Even some domestic products like beer and bourbon are more expensive recently through wholesale suppliers, meaning higher prices for the customer.
“Unfortunately, we have to pass that cost on to the customer,” Blackburn said.
Patterson said all of his commodities including grass seed are up around 5%. He expressed concern about the amount of business the store will receive if the inflation rate were to continue above 5% into the new year.