Friday, December 28, 2007

Economics Blog : Are Manufacturers' Inflation Worries Growing?

Remember what I said earlier on inflation?

Right now manufacturers are eating the increases in raw materials, but that may not last much longer.

My concern on inflation is simple, the US imports a lot of stuff, including commodities and raw material. A falling US dollar means all that stuff if going to cost more; a USD from a year ago bought more imports than it does now.

Up until now, manufacturers have absorbed these costs so as to not lose marketshare, but eventually these manufacturers (as profit-maximizing entities) will have to pass along those higher costs to the consumer, and viola: inflation.

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