Price disaster: production costs never so high. Tide of closures are coming
Today the data on producer prices for the Italian economic system have arrived, and the data is biblical disaster. Producer prices in Italy rose 20.4 percent year-on-year in October 2021, up from 13.6 percent the previous month and well above market expectations of a 15 percent increase. It was the highest reading ever recorded, accentuated by the low cost increases caused by the pandemic in the preceding period. On a monthly basis, producer prices rose 7.1 percent, also the highest ever recorded, from a 1.6 percent increase in September.
A real disaster because accompanied by a retail market that does not have the strength and demand to tolerate this price increase. Retail inflation was only 3%.
Since it sends demand, companies cannot pass the cost increase on to consumer prices. If they do, the demand drops. So they can only reduce praise margins, as long as they can, and cut on non-essential costs. So, when there are no more margins to cut, rather than going at a loss, companies will close. If all goes well up to cost reduction, for a few months, especially if the source of the cost increase is energy. Otherwise, and much more likely, forever.
Certainly one of this huge disaster, which if not corrected will lead to long-term productive and employment years, is due to shocks on the side of energy costs, but let's not forget that part of these costs exploded due to the will, wrong and dangerous. , to make the green transition coincide with the Covid-19 crisis, all without a true and adequate industrial and energy policy. If in Rome and Brussels you play with the "Five-year plans" on paper, someone pays the consequences, starting with fixed income earners, workers and entrepreneurs.
What can be done? A bit of supply side economics, cutting all improper energy costs, at least for a certain term, carbon taxes, even at the cost of temporarily denouncing the treaties. Otherwise, our production system will remain green, before we die.
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The article Price disaster: production costs never so high. A flood of closures is coming from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/disastro-sui-prezzi-costi-alla-produzione-mai-cosi-alti-in-arrivo-marea-di-chiusure/ on Mon, 29 Nov 2021 15:10:10 +0000.