The Supply Chain Cause for Inflation Part 3 of 3

Apr 15, 2022 | Finconomics 101

In the third part of our 3-part series on inflation (part 1 & part 2), we explore how supply chain disruptions effect inflation (probably most relevant to our current situation). 

This is what the press refers to as “supply chain disruptions”, really just a fancy way of saying that the suppliers don’t have enough to sell, providing them an opportunity to charge higher prices. This could be caused by a drought (food shortage), closed oil pipelines (gas shortage) or a lack of employees to work in the factories and to drive the delivery trucks (maybe because of covid fears or because of government assistance that has left them flush with cash). Notably, raising interest rates to check inflation caused by supply constraints is designed to lower demand to meet lower supply (bringing prices back down) when the real challenge is to increase supply to meet normal demand levels (something the Fed is not equipped to deal with).   

In conclusion of our 3-part series, it is better not to try to flatten the economy’s natural up and down cycles by manipulating interest rates because this often leads to excesses that are even more difficult to manage. It would be better if consumers and businesses were not fooled into borrowing & spending more because of lower interest rates but, rather, made financial decisions based on their income levels guided by their long-term saving and investing goals. Also, it would be better if the Fed did not seek to put money into consumers’ pockets because this creates artificial demand that causes inflation while also decreasing the labor force’s motivation to work, thus decreasing supply and further fueling inflation.

Follow us on LinkedInTwitter, and Facebook!

Disclaimer of Liability: Although the information in this post has been obtained from sources NBE Media LLC believes to be reliable, NBE does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. NBE Media LLC’s analyses and opinions are not a guarantee of the future performance of the economy nor any industry, company or security. NBE Media LLC disclaims all liability for any misstatements or omissions that occur in the publication of this post. In making this post available, no client, advisory, fiduciary or professional relationship is implied or established. While this post is intended to provide an relevant economic analysis, it cannot be used as a substitute for independent investigations and sound business judgment.
Marketing NFS Graphic Updated
NoBull Posts Thumbnail
Restaurant Research

Email Sign-up

15 Second Posts

Darden 1Q24: Sales +11.6% Y/Y, Comps +5.5% Y/Y

Darden reported that industry same-restaurant sales increased +0.9% and industry same-restaurant guest counts decreased -4.2% during its fiscal 1Q24. The chain’s comps outperformed the industry by +4.1% and its traffic outperformed by +4.3% (= flattish traffic for Darden during the quarter).

Job Market Looks Solid

In this chart, we subtract total quits from total hires. The excess of hires over quits looks very good relative to the historical level even though the positive gap recently dipped slightly. Workers are staying at their jobs longer even as they continue to have new employment opportunities.

The Economics of Politics

As the U.S. gears up for the 2024 elections, it is important to consider changes to our elections and governance that can unite the citizens of this great country.

2Q23 Retail Same Store Sales

NoBull’s Retail Same Store Sales Report benchmarks 80+ large consumer retail companies by domestic same store sales including annual (2019 – 2022) and quarterly results (2Q22 to 2Q23).

Walmart Investor Presentation: Inflation Here to Stay

While general merchandise prices are lower y/y, they remain elevated compared to 2 years ago. As Walmart does not believe general merchandise and food (dry grocery) & consumable prices are ever going to completely disinflate, management suggests the need for a country-wide wage increase rebalancing.

Interesting Conversation with Fed Chair Powell

Okay, Powell didn’t actually take our call, but we offer a transcript of a potential discussion between the Fed Chair and John Q. Public. It’s very insightful, so please read on.

The Problem with Investment Diversification

Every investment advisor and business student knows that portfolio diversification is key to wealth building. Show me an investor who can beat the S&P 500 Index by buying a few handpicked stocks and I will show you a hedge fund manager in the making. However, there is a huge problem with this strategy that no one is talking about.

Part 3: Analyzing Performance of Low-Income Oriented Retail Companies

We created an index for the financial performance of 5 low-income oriented retail companies to assess the health of this demo. While we recognize that these companies have benefited from the trade-down of higher-income consumers, things look reasonable at least through calendar 2Q23. 

Part 2: Incremental Interest Payments Squeeze Disposable Income

In this post, we quantify the pressure on disposable income driven by credit card & auto loan payment increases since the onset of the Fed rate hikes in early 2022 in addition to the impact of the coming resumption of student loan payments in October 2023.

Part 1: Keeping an Eye on the Consumer’s Top-Line

The consumer’s top-line benefits from a high employment rate, generous raises, and a healthy savings rate which indicates an income surplus.

Digital Marketing Opportunities
Restaurant Research

A Restaurant Research LLC Company