In what seems to be a weekly occurrence, another price increase is looming in the pressure sensitive industry. Avery Dennison announce another increase, effective June 20, 2011. Inflationary pressures persist in the PS supply chain, across all components. Chemicals, resins, and paper remain in tight supply and suppliers have pricing power. “But the economy has slowed down,” you respond. Has it?
China and the EU are raising interest rates in an effort to combat inflation. Resources used in the PS industry are in great demand across the world, for everything from smart phones to dog food bags. One dramatic change that has occurred in the last 10 – 15 years is that markets have become global, not regional. Supply will go to where it can garner the highest price. Unfortunately for those in the PS world, that means we have to pay more to get what we need. We’re the tail on the dog for a lot of the major components we use; there are bigger markets that use our raw materials. (Some of you might use another body part to describe our position, but this is a public forum that calls for some decorum!)
Unemployment in the US is starting to decline – job growth has picked up by most reasonable metrics. One interesting factoid – through April, Michigan, Indiana, Ohio, and Wisconsin have led the country in job growth. Why? Because manufacturing has rebounded. The unemployment rate in Northeast Ohio, my home base, has dropped below the national average. While cynics will claim that’s because people are leaving, the underlying data supports job growth as the major cause for the drop. NE Ohio just had its first Q1 job growth since 2007. Think about that – the region lost jobs in the first quarters of 2008, 2009, and 2010. It gained jobs in 2011. I continue to believe the general economic trend is upward, not backward. I still maintain inflation in our industry will moderate in the near future. We will see more evidence of inflation in the overall economy. The government will continue to tell us otherwise until the 2012 election is decided.