Not Just Steel Hurting Manufacturers’ Bottom Line

Many manufacturers are raising prices and cutting back on investments as the costs of raw materials soar.  The every day raw materials that most people don’t think about, steel wire, lubricating oil, packaging, shipping are also getting more and more expensive the Associated Press reports.

There are more than just the above reasons for the price hikes. Increased competition from outside the U.S. is sited as a major concern for manufacturers.

“This is one of those rare and unique moments in economic history, like the Great Depression,” Bob Allsbrook, chief economist at Regions Financial Corp., told The Birmingham News. “This isn’t the Great Depression, but the sheer number of factors aligned against businesses right now is unique in the same way the Depression was.”

With oil prices at record numbers, that determines the price of many things, from ground-freight rates to plastic packaging.  And, the price of steel sheets, used in everything from appliances to automobiles, has risen 82% since January and has almost doubled since last year.  Cotton prices have also risen 12% in the past year.  Even the price of coal, which is used to produce 84% of the nation’s electricity, has nearly tripled.

Businesses can’t handle the rising prices for long before they look for ways to cut costs such as layoffs, decreased spending on technology and reducing employee benefits.