BLS released the PPI report and it shows producer price index at a whopping 9.5 percent! So much for inflation abating any time soon even with the Fed jawboning interest rate hikes.
The Producer Price Index for final demand increased 1.0 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This rise followed advances of 0.4 percent in December 2021 and 0.9 percent in November. (See table A.) On an unadjusted basis, final demand prices moved up 9.7 percent for the 12 months ended January 2022. Source: BLS.gov
CNBC is reporting that small businesses are at a tipping point caught between high inflation and supply chain disruptions and it’s taking a heavy toll. Here is a key quote:
In multiple ways, small business owners have lost leverage with suppliers. Large buyers are favored in transactions, and smaller buyers are no longer able to order in smaller batches (e.g. half-pallets) or rely on contract pricing.
CNBC.com
This is in line with our thesis a while ago that small businesses would get decimated but it would first start with labor. In, What’s Happening With Hourly Wages? T-Rex Will Eat First, we made the case that large corporations will eat up the best labor first since they have deep pockets and can afford to pay the higher wages while smaller businesses will be left with the remaining scraps. The problem also occurs in the supply chain where large businesses have huge economies of scale that make it impossible for small businesses to compete.
It just doesn’t bode well for small businesses, meanwhile we expect mid-sized firms to get gobbled up by larger corporations and we are exploring another avenue of investing in companies that are primed for take over and buyouts.
Stay tuned and stay solvent…