Friday, January 21, 2011

Fortune: America's Secret Commodity Crunch

As climbing commodity prices continue, mainstream media can no longer avoid the fact. Fortune Magazine reports:
The commodities crunch is corporate America's dirty little secret. Even as consumers open their wallets once again and sales volume improves, inflationary pressure is creeping in. It's hitting companies small and large... Commodities prices continue to skyrocket -- last year crude-oil prices were up 17.3%, sugar climbed 25.5%, and wheat rose 49.3% -- and eventually will start seriously chomping into corporate profits. (Not that investors have noticed: Thomson Reuters has analysts forecasting a 13.4% climb in corporate profits in 2011.) "Either the revenue picture will start increasing more rapidly over the next few quarters, and that will offset higher costs, or profits will get hit," says Ashwani Kaul, head of his own investment advisory firm. "Something has to give."...

Let's just hope that the more up-to-date cost increases we're hearing about from corporate America aren't a harbinger of more ominous things to come on the inflationary front. Otherwise, all that money the Fed is pumping out could wash over us like a flood, sending prices soaring and crushing consumers.

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