Is inflation on the horizon?
Now that the economy is improving, and energy prices rising, why would we think prices won’t rise on everything except maybe home sales? I predict that prices will rise by 2% within the next six months. Already we are seeing higher prices for the materials we purchase for our electronics assembly business, circuit boards, flux, solder, electronic components and wire. In the near future any raw material that has a significant energy component in the cost of its manufacture will be much more expensive. We are hearing that we should expect a 40% increase in electricity prices, especially in areas which rely on coal fired electrical generators. We know that will drive prices up. Fortunately we get a good portion of our electricity from Duke Energy who has nuclear powered generators.
What about freight? Petroleum prices are already on their way higher. This will make our domestic manufacturing more competitive with offshore competition, but what percentage increase in domestic freight costs do we expect, 10%, 20% or more? Who knows, but as we have learned to run a lean organization here at gmsww.com during this shabby economy; we will be prepared to get along as well or better than many.