Every once in a while, I stumble upon a word describing something that is stuck in my head. You may not have heard of it, but I swear it’s a real thing and this time you not only are going to hear me say it, you are going to be living it! The word is “panflation”!
What is it? Panflation was a term first coined in 2012 by The Economist, an international weekly newspaper printed in London, England, and originally it referred to the inflation of everything. That was before the COVID-19 pandemic.
Examples included women’s clothes actually changing or “inflating” sizes so women could feel better if they can easily fit into a smaller label size (fashion retailers have been adjusting the size numbers now for years) so that a size 10 is really a size 14. Remarkable, right?
Then there is “grade inflation”. An A grade today is equivalent to a C grade of the 1980s. “Food inflation” when it comes to portion sizes which seem now to be enormous. And even “job title inflation” you know like SVPCOJARWH which stands for Senior Vice President and Chief Officer of the Division of Junior Accounting Reserves in the Western Hemisphere sort of titles.
But for my use, I am expanding its newest definition. It’s pretty simple really. I’m using it as the way to describe what we are currently living through. It’s the combination of what we have suffered through with the worldwide COVID-19 pandemic and the resultant rise in the cost of everything—the inflation cycle we are now experiencing. So, yeah, combine “pandemic” and “inflation” and you have: “panflation”!
It Just Had to Happen
I know there are no prizes being handed out for it, but I have been writing about the inflation factor that the pandemic is causing now for over eight months and it’s only recently that the rest of the world is catching up to recognizing it.
My first post, “Inflation Looms as 2021 Draws Near and Few Are Talking About It”, touches on some of the facts and reasons for it. Panflation got little response back then, but that has now changed and everyone from Yahoo to Google, from Bloomberg to CNN and from MSNBC to Fox News is talking about the inflation that you are seeing out there. The war is on and the battles lines are drawn. So where do you stand in the Panflation 2021 battle?
As Retail Prices Climb, a Rose by Any Other Name Is Still a Rose
Recently, Bloomberg published the truth about Panflation 2021. Did you see it? The amazing thing about it all is how much business itself is trying to deny it all and actually make you think it’s all just an illusion. The companies seem to think that if they try not to say it out loud, it just isn’t true.
Here’s part of what Bloomberg said on June 8th: “From clothing to cereal to trash bags, prices are going up fast. But many companies aren’t saying that, at least not in language most shoppers would recognize.”
As Shakespeare wrote about a rose, inflation or Panflation 2021 is just the same. You can call it anything you like, it’s still what it is: higher costs to you the consumer and maybe even higher profits for those who make what you buy.
So What New Words Are the Manufacturers Using?
If you ask Procter & Gamble Co., it’s not raising prices, it’s “taking pricing.” Rival Unilever, known for its soaps and Axe body spray, says it’s been “very active with their pricing.” But the grand prize for creativity and yes, gall, when it comes to speaking garbage about Panflation has to go to home-improvement retailer Lowe’s whose finance chief told investors this past week that it was “elevating our pricing ecosystem.”
I think Bloomberg hit it on the head when it said that companies are now doing “rhetorical backflips” to avoid saying what they’re actually doing: raising prices. But the truth is you can’t hide the truth.
The makers and sellers of consumer staples are now notching up their prices thanks to the pandemic and are now under pressure to maintain that performance even as costs go up, labor markets tighten, and they face extremely tough comparisons with last year’s growth.
Need more examples? How about French yogurt maker Danone who says “we have managed to pass on some prices” when inflation accelerated.
Campbell Soup Co. said in June that it expects “pricing actions” to take hold early in the next fiscal year. It goes on and on.
Cereal king General Mills Inc. jargon includes the phrase “strategic revenue management” and “holistic margin management”, which is not language you’d ever find on the back of any cereal box.
Corporate doublespeak is not new, of course. For years, layoffs have been referred to as “right-sizing”, “headcount rationalization”, or “reductions in force”. And businesses say they provide “synergy” and “solutions”, not products or services. It’s all been done before and here we go again.
And Then There Are Package Sizes
Another sneaky method by manufacturers is to keep the price of product stable but reduce the package size slightly thereby increasing the price per ounce. Think about it. Just a small size reduction in any package size can mean bigger profits for a company. That’s even more tempting right now and is being implemented, so look carefully at what you are buying and its unit pricing.
Panflation Is Surging But It’s Not Stopping Buyers
The U.S. Bureau of Labor Statistics reported that American consumers absorbed another surge in prices in May, 5% over the past year, the biggest 12-month inflation spike since 2008. The rise in consumer prices that the Labor Department reported reflected a range of goods and services now in growing demand as people increasingly shop, travel, dine out and attend entertainment events in a rapidly reopening economy. The price of new and used cars is climbing. So is the price of gasoline.
Increased consumer appetite is bumping up against a shortage of supply.
As consumers increasingly venture away from home, demand has spread from manufactured goods to services like airline fares along with restaurant meals and hotel prices with rising inflation in those areas too.
The Labor Department’s own version of sticker shock on the rise in consumer prices means that you should be getting ready to feel that pain now.
Have you lived the gasoline price rise? This month, gasoline prices are $1.00 per gallon more than last year at this time and have topped $3.00 a gallon in many states.
Buying a car and gasoline has gotten more expensive and that means when you pull up to a drive-through at your favorite fast food place, you can expect to pay more for your burger or burrito. After all, they get their supplies trucked in from everywhere and that takes gasoline.
Prices are climbing for all kinds of things as we rebound from the pandemic recession. But so far, sticker shock is not stopping buyers as reported this week.
There are real reasons why higher prices are not deterring you and everyone we know from getting out there and buying first, looking at prices second. Pent up demand is certainly the big one.
The Rise in Wages
Another factor is the clamor and response to rising wages. If you thought that getting an increase in the minimum wage didn’t mean rising prices for goods and services, I have some oceanfront land in Arizona I’d like to sell you. Someone has to pay for those wage increases and it’s like going to be us!
By the way, no matter what reason you use to go out and shop without thought, it’s a big mistake and you will eventually suffer because of it. Your tacit or active approval of these companies in raising prices now will come back to haunt your wallet soon!
We’ll get the latest temperature check on Panflation when the Labor Department releases the consumer price index for June soon. But for now, more people are out doing what comes naturally and was so sorely missed that shopping and spending have blinders on and the rising prices may slip under the radar. Don’t be shocked when June’s numbers go through the roof.
What the “Big Voices” Are Saying
I wrote back on May 4, 2021, “Warning: What Warren Buffett Says About Rising Inflation Matters”. I wasn’t kidding. In it, Buffet said that the economy is really red-hot. When Warren Buffett speaks, we should listen. The billionaire said that serious levels of inflation are starting to take hold as the U.S. economy roars back from the COVID-19 downturn.
“We are seeing substantial inflation,” Buffett said at the Berkshire Hathaway annual shareholder meeting. “We are raising prices. People are raising prices to us, and it’s being accepted.” Buffett knows about such things.
Up until now, the belief is that the current spike in prices will be temporary. So far, this debate has largely been missing three things: what the best forecasters are saying, what’s happening in other countries, and steps that can be taken to fix problems in the supply chain.
Treasury Secretary Janet Yellen’s statement a few weeks ago was “We will watch this very carefully and try to address issues that arise if it turns out to be necessary” sounds like someone saying “la, la, la, la” and not looking the facts in the face to me.
The scariest part of it all is that even with these results, they are not expected to deter shoppers’ spending or scare investors off as inflation increases.
I don’t know anyone who actually enjoys paying more for things and now is no time to start if you suffered financially during the pandemic (and who didn’t in some way). Now is not a good time to start spending without thought and a budget and a plan. You are in a war and you may not even realize it because you want to return to being the consumer you once were and loved. Don’t fall through the floor and wind up in a pile of debt that can be avoided.
Have you seen prices climbing? Have you done some planning and budgeting to fight it? What does Panflation mean to you and your family?