Wow. The US government sure is working hard to avoid or emerge from a recession.
We all know that yesterday’s relatively large rate cut by the Fed would have been larger had it not been for inflation fears. And then there are those stimulus payments coming in May.
I am glad to see this effort into growing the economy and preserving/creating jobs, but I am growing more and more concerned about what matters so much to purchasing professionals: price levels.
With the falling dollar, a lot of the global sourcing that was the key to purchasing success in recent years is starting to show signs of having a downside when the home currency is on the decline (and proper hedging techniques weren’t applied). Then, the stimulus efforts may heat up demand so much that prices have only one way to go: up.
On this blog, I’ve posted before about the debate over whether or not economic stimulus checks to taxpayers will work. Well, last night, I became even more convinced that they will.
I was visiting my parents, who grew up in the Great Depression era. When it comes to spending money, they are a couple of the biggest tightwads that I know. They grew up having to “do without” so even now when they can afford to be a little more carefree with their money, they voluntarily choose to “do without.”
We were talking about the stimulus check that they stand to receive in May. I shared my opinion that senior citizens collecting Social Security and not paying taxes should not receive the checks. I feel that this money is intended to be spent so that the economy is stimulated. And I felt that seniors are the demographic group most likely to simply stash the money away until it is inherited or found under a mattress.
Well, was I in for a surprise!
I said this to my parents: “The question is this: will you use the money to buy something that you would have not bought otherwise?”
Though I expected to hear “no,” they told me that they were going to replace the flooring in their kitchen.
I then asked: “So you wouldn’t replace your flooring if you weren’t getting the check?”
They said no.
Now, if my parents are planning to be carefree about spending their stimulus payments, I think a lot of people will!
But if there is such a blast of demand, won’t that create upward price pressure across many industries?
With the price of gas on the rise and a typical gas price surge around Memorial Day (the same time the stimulus checks will be spent), could we see inflation like that we haven’t seen in a long time?
I guess if the economy is growing, it might be a good problem to have.
But hold onto your hats…it might be very tough to achieve cost savings this spring and summer.
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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