Inflation Hits Essential Goods

FOR MOST AMERICANS, INFLATION IS A PRIMARY CONCERN. GAS PRICES ARE UP. 44% THIS TIME COMPARED TO LAST YEAR. THAT'S ACCORDING TO TRIPLE A MOTOR CLUB OVER THE PAST YEAR, U.S. ENERGY PRICES INCREASED BY NEARLY 28% AND ARE EXPECTED TO RISE DUE TO ONGOING GEOPOLITICAL INSTABILITY. SHOPPERS PAYING MORE AT THE GROCERY STORE AS OVERALL PRICES INCREASE, INCLUDING THE COST OF MOST MEETINGS. >> JOINING ME NOW IS DOCTOR VICTOR CLAAR, ASSOCIATE PROFESSOR OF ECONOMICS HERE AT FLORIDA GULF COAST UNIVERSITY. THANK YOU FOR JOINING US TODAY. GREAT TO BE HERE. THE BUREAU OF LABOR STATISTICS JUST RELEASED THE MOST RECENT >> PPI REPORT AND IT HAS SOME PRETTY GLOOMY NEWS AND OUTLOOK. THE NUMBERS ARE TRIPLE OF WHAT WAS EXPECTED. CAN YOU TALK ABOUT WHAT THE PPI IS AND WHAT IT MEANS FOR OUR VIEWERS? SURE. WELL, IT SOUNDS A LOT LIKE THE CPI, THE CONSUMER PRICE INDEX THAT'S ALSO MEASURED BY THE BUREAU OF LABOR STATISTICS. >> TRIES TO CAPTURE THE AVERAGE COST OF A BASKET OF GOODS THAT A TYPICAL HOUSEHOLD BUYS. THE PPI IS LIKE THAT, BUT IT'S FOR PRODUCERS. SO IT'S NOT THE PRICES THAT HOUSEHOLDS PAY FOR GOODS AND SERVICES. IT'S THE PRICES THAT PRODUCERS OF THOSE GOODS AND SERVICES PAY FOR THE INPUT THAT THEY USE IN THEIR PRODUCTION PROCESS. >> AND SO IF THAT WHOLESALE INFLATION HAS. RISEN, TRIPLE FROM WHAT WAS EXPECTED, THAT IS REALLY NOT GOOD NEWS. >> WE'VE SEEN RECENT UP TAX IN THE CONSUMER PRICE INDEX AND IT LOOKS LIKE CONSUMER INFLATION IS THE KEY AND NOT GOING ANYWHERE AND MAY BE ON THE RISE AGAIN. AND IF YOU PUT THAT TOGETHER WITH INCREASES IN THE PRODUCER PRICE INDEX, CONSUMERS COULD BE IN FOR A VERY ROUGH RIDE BECAUSE TYPICALLY THOSE INCREASES IN PRODUCER PRICES, THEY GET PASSED ALONG. INEVITABLY THE CONSUMERS IN THE FORM OF HIGHER PRICES. >> CAN YOU TALK ABOUT WHAT IS DRIVING THIS? >> A LOT OF THINGS ARE DRIVING IT RIGHT NOW. SUPPLY CHAIN ISSUES. WE THOUGHT THOSE WENT AWAY DURING THE PANDEMIC, BUT THEY'RE STILL AROUND AND IN PARTICULAR, FOSSIL FUEL PRICES BECAUSE OF THE CONFLICT IN IRAN AND UNCERTAINTY ABOUT WHEN IT WILL END AND HOW IT WILL IN ALL OF THOSE THINGS HAVE CREATED A LOT OF UNCERTAINTY AND SUPPLY CHAIN ISSUES THROUGHOUT THE WORLD YOU'VE PROBABLY SEEN AND YOUR VIEWERS, I'M SURE HAVE SEEN WHATS GOING ON WITH THE STRAIT OF HORMUZ, EVEN THOUGH AMERICANS GOT A LOT OF THEIR OIL FROM PLACES LIKE WEST TEXAS, IT DOESN'T CHANGE THE FACT THAT GLOBAL ENERGY PRICES ARE ON THE RISE AND ALMOST EVERY SINGLE GOOD OR SERVICE THAT AMERICAN BUYS TODAY WAS MADE POSSIBLE BECAUSE OF FOSSIL FUELS. >> HOW IT IMPACTS FULL IS THE INCREASING PRICE OF DIESEL FUEL WHEN IT COMES TO CONTRIBUTING TO THE OVERALL COST OF THIS PPI, THE INFLATION. >> IF YOU THINK ABOUT SOMETHING REALLY SIMPLE, LIKE A QUART OF MILK OR A CUCUMBER AT PUBLIX OR SUPER WALMART OR EVERY SHOP SUPER TARGET. YOU THINK THAT AS A CONSUMER THAT YOU'RE JUST BUYING THE PRODUCT, BUT THEY'RE SO MUCH THAT HAPPENS ALONG THE SUPPLY CHAIN TO MAKE THAT PRODUCT AVAILABLE FOR YOU AND REFRIGERATED IF IT'S NECESSARY IN THE GROCERY STORE. SO WHEN YOU SEE A CUCUMBER OR A QUART OF MILK THERE ARE ALL KINDS OF THINGS THAT HAPPENED ALONG THE SUPPLY CHAIN LONG BEFORE IT ARRIVED FOR YOU TO PICK UP CONVENIENTLY AND NOT EVEN THINK MUCH ABOUT IT BECAUSE IT'S THERE FOR AND THE PRICE FOR NOW CONTINUES TO BE RELATIVELY REASONABLE. BUT THERE'S CAUSE TO MAKE THE PLASTIC GUN OR THE PAPER CARTON. THERE'S CUSTOM MAKE THE INK FOR THE LABEL. THERE'S SOMEBODY WHO MAKES THAT LABEL. SOMEBODY HAS TO ATTACH THE CAP. IF IT'S A PLASTIC JUG OF MILK, ALL OF THESE THINGS ADD UP, RICK PRODUCER COUGH AND ULTIMATELY THEY GET PAST A LONG THE CONSUMER COSTS. AND TO THE EXTENT THAT TRUCKING PLAYS A KEY ROLE IN ALL OF THOSE ACTIVITIES ALONG THE ENTIRE SUPPLY CHAIN. IT'S INEVITABLE THAT WE'LL SEE HIGHER PRICES FOR PRODUCERS AND INEVITABLE HIGHER PRICES FOR CONSUMERS THAT WILL REALLY FEEL REALLY, REALLY ROUGH WHEN WE GO TO THE GROCERY STORE, I WAS JUST GOING TO SAY, WHAT DOES THIS BOIL DOWN TO WHEN YOU'VE GOT A FAMILY THAT'S TRYING TO BUDGET FOR THE FORESEEABLE FUTURE AND THEY'RE UP. >> TRYING TO GET GAS AND THEY ARE TRYING TO GO TO THE GROCERY STORE. WHAT IS YOUR WHAT IS YOUR ADVICE? >> THAT'S THE WORST THING THAT HAS MADE INFLATION SO BRUTAL FOR FAMILIES NOT ONLY DURING THE PANDEMIC, BUT SINCE FOR ALMOST EVERY FAMILY, THE THINGS THEY HAVE TO BUY GASOLINE TO GO PLACES. GROCERIES, TO PUT A MEAL ON THE TABLE, WENT PAYING PAYING YOUR MONEY, MONTHLY RENT. ALL OF THOSE THINGS WE'VE SEEN HUGE INCREASES IN THOSE PRICES NOT ONLY DURING THE PANDEMIC BUT SENSE. IN FACT, IF YOU LOOK AT THE MOST RECENT INCREASES IN THE CONSUMER PRICE INDEX, NOT ONLY IS IT HIGHER GAS PRICES, IT'S ALSO HIGHER SHELTER PRICES AGAIN. SO WE THOUGHT WE WERE DONE WITH THAT DURING THE PANDEMIC. BUT THAT DOESN'T SEEM TO BE THE CASE. >> WHAT ABOUT THE ROLE THAT TARIFFS ARE PLAYING CURRENTLY? >> ECONOMISTS ARE REALLY CLEAR ON TARIFFS. TARIFFS ARE A TAX PAID BY AN AMERICAN COMPANY THAT EMPLOYS AMERICAN WORKERS AND SERVICE AMERICAN CUSTOMERS. SO IF A POLITICIAN TRIES TO TELL YOU THE TARIFFS WON'T BE INFLATIONARY, THEY'RE NOT TELLING YOU WHAT MOST THE VAST MAJORITY OF ECONOMISTS BELIEVE IF YOU HAVE A HIGHER COST OF PRODUCTION, IT LEADS TO HIGHER COSTS OF YOUR PRODUCT. IF WE'RE CURRENTLY SEEING THE ADMINISTRATION SUGGESTING THAT THEY MIGHT PULL BACK ON BEEF TARIFFS BECAUSE SURPRISE THE DEFENSE REALLY EXPENSIVE RIGHT NOW. IT MUST BE BECAUSE WHAT ECONOMISTS BELIEVE IS TRUE, TARIFFS ARE INFLATIONARY AND THE ADMINISTRATION IS ADMITTING THAT BY SAYING, WELL, MAYBE WE NEED TO REDUCE RESTRICTIONS ON OUR IMPORTED BEEF RIGHT NOW. THE BAD NEWS IS THIS CREATES UNCERTAINTY FOR AMERICAN FARMERS BECAUSE THEY'VE GOTTEN USED TO THESE PROTECTIONS FOR OVER THE LAST YEAR OR SO. WHAT WOULD BE YOUR ADVICE OR TIPS ON SOMEONE TRYING TO REALLY MUSTER THROUGH? >> THE FORESEEABLE FUTURE? WE DON'T SEE AN END IN THIS ANY TIME SOON. FOR A TYPICAL FAMILY. THE WHAT WHAT YOUR PARENTS TOLD YOU WAS TRUE. DON'T BUY THINGS UNLESS YOU ACTUALLY NEED THEM. >> EVEN IF IT'S ON SALE DOESN'T MEAN YOU NEED IT. THAT'S REALLY IMPORTANT. THE OTHER THING IS TAKE CARE OF THE BIG THINGS. FIRST, FEEDING YOUR FAMILY KEEPING A ROOF OVER THEIR HEADS, GETTING TO WORK, GETTING TO SCHOOL, GETTING THROUGH THAT CARPOOL LANE. THOSE ARE MISSION CRITICAL FOR A FAMILY, ESPECIALLY A FAMILY WITH YOUNG CHILDREN. SO FIGURE OUT HOW THOSE THINGS WILL WORK. FIRST AND THEN ONCE YOU PUT THOSE IN BECAUSE THEY'RE A CENTRAL AND BIG ITEMS IN A FAMILY'S BUDGET, THEN WORK IN THE OTHER THINGS AFTER THAT. >> HOW LONG DO YOU FORESEE THIS INFLATION RISING AND THE AND THE PPI AS WELL GOING UP. >> THAT'S THE REAL KICKER RIGHT NOW. MARKETS DON'T LIKE UNCERTAINTY. I DON'T LIKE UNCERTAINTY, WHETHER IT'S WITH PRICES OR ANYTHING ELSE IN MY LIFE. I LIKE CERTAINTY. THAT'S THE REASON PEOPLE BUY INSURANCE. THEY DON'T LIKE UNCERTAINTY AND THEY DON'T LIKE THE RISK. I THINK AT THIS POINT BECAUSE THERE'S SO MUCH UNCERTAINTY ABOUT WHAT'S GOING TO BECOME TARIFFS AND THERE'S SO MUCH UNCERTAINTY ABOUT HOW LONG THINGS ARE GOING TO DRAG OUT WHERE IRAN IS CONCERNED. I THINK A LOT OF WHAT WE'RE SEEING IN MARKETS RIGHT NOW IS JITTERS ABOUT AN UNCERTAIN FUTURE. AND SOMETIMES IF YOU'RE A PRODUCER, YOU RAISE PRICES, NOT BECAUSE YOUR COSTS ARE HIGHER RIGHT NOW, BUT YOU THINK THEY MIGHT BE HIGHER DOWN THE ROAD AND YOU'RE PROTECTING YOURSELF BY RAISING PRICES TODAY TO HAVE TO HANG TIGHT. WE HAVE TO HANG TIGHT. >> THANK YOU SO MUCH FOR JOINING US TODAY. DOCTOR SKLAR,