Is Stagflation on Tap for 2008?

December 27, 2007

Stagflation. All you 20- and 30-somethings in the industry probably don’t remember the combination of no growth and high inflation that crippled economies around the world back in 1973. Thirty-five years may seem like ancient history for some, but with oil prices holding steady at $90 a barrel, food prices rising, housing prices tumbling around the world and the U.S. economy slowing, the likelihood of stagflation grows stronger every day.
Even former Fed chairman Alan Greenspan has issued a warning of his own, recently telling reporters, “We are beginning to get not stagflation, but the early symptoms of it.” Not exactly music to current Fed chairman Ben Bernanke’s ears.
But the facts support Mr. Greenspan’s assessment. U.S. consumer price inflation reached 4.3% in November from a year ago, while producer price inflation was 3.2%—its fastest gain since 1973. In Europe, the November inflation rate reached 3.1%, its highest level in more than six years. With data like these, it’s clear that 2008 may get off to a rough start.
The good news for the household and personal products industry is that many of our products are at least recession-resistant or, in the case of some cosmetics, recession-proof. One of these sectors is laundry care, which we report on this month at Happi.com
But that doesn’t mean that companies won’t feel the sting of stagflation. After all, nearly every supplier and manufacturer I’ve spoken to during the past two years has bemoaned the surging cost of raw materials and the difficulty of pushing through price increases.
Of course, some consumers will pay any price when it comes to fighting wrinkles. This month, we look at how some cosmetics companies are developing novel delivery systems to help actives penetrate the skin. Be sure to read Transdermal Delivery this month on Happi.com. But remember, back in 1973, nobody was paying $300 for “hope in a jar.” It will be interesting to see what happens when the U.S. and European economies head south.
We hope you enjoy this edition of Happi. As always we welcome your comments and suggestions.

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