By: Eric Morath, Heather Haddon, and Jacob Bunge via The Wall Street Journal
May 10, 2018
Many businesses face higher costs for fuel, freight hauling, steel and accounting services. These input price increases put pressure on company margins because they outstrip consumer price increases. There are several companies and industries that feel constrained they can't pass on higher costs. Sysco Corporation is a foodservice distributor. The company tries to pass on expenses but can't always do so. The issue is freight costs. There are more e-commerce deliveries that create demand for trucks and drivers. The strong economy and licensing mandates also affect the supply drivers. Suppliers and retailers will need to budget for these additional costs. Freight expenses are also an issue for Tyson Foods. Input prices started to climb and outpace overall inflation in 2016. Some companies are passing costs on to customers. These include PepsiCo and Whirlpool. Whirlpool launched "cost-based price increases." Those increases ranged from 5% to 7%. Retail prices at Lowe's and Home Depot increased 15% for Whirlpool washers and 7% for Maytag. The CEO of toolmaker Stanley Black & Decker Inc. thinks his company can successfully pass on costs in the form of higher prices.
1. In what ways are supply and demand affected in this example?
2. What are the input costs discussed here and how and why are they changing?
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