Aug. 8—For more than 30 years, Scarlet Wilson has mixed, kneaded, cut, fried, glazed and filled hundreds of thousands of doughnuts at her stores, aptly named Scarlet's Donuts. —Having survived several recessions and a pandemic, she knows business goes as the economy goes. And while the financial markets are at or near record highs in the expanding economy, rising prices are a mounting concern for everyone.
"Just since November, we're paying 64% more for shortening, and all of our salespeople say there's no end in sight," Wilson said of a key ingredient and expense in her business.
Wilson, however, is not alone. While rising prices at restaurants and grocery stores are currently the most visible, inflation is hitting nearly every sector of the economy.
Last month, the University of Michigan's Consumer Sentiment Index fell to a final reading of 81.2, the lowest level since February.
"Consumers' complaints about rising prices on homes, vehicles, and household durables" reached an all-time record, said Richard Curtin, director of the survey.
But despite the complaints, home sales continue to be strong, automakers are having difficulty keeping new and used cars in stock, furniture sales are vigorous — consumers are buying.
And that's what's fueling inflation, which is caused by rising prices because of increases in production costs like raw materials and wages. Surges in demand for products and services cause inflation, as consumers are willing to pay more for the product.
Quote
So it comes as little surprise that consumers expect inflation to rise to 4.7% over the next year, the highest level since August 2008.
Rising costs for businesses mean rising prices for consumers
The 64% increase in shortening for Scarlet's Donuts equals about $20 more for each block. Wilson said she goes through about a dozen blocks per week, representing approximately $240 in extra expenses each week.
But that's just a single ingredient among many. There are increased costs for doughnut mix, flour, sugar, fillings and more.
Wilson and daughter Amber Gentry, who has the Scarlet's store on North Gloster Street, have tried to avoid passing along those increases to their customers, but now she says, "we really don't have a choice."
"I'm the world's worst at raising prices, and we haven't raised them in about three years," Wilson said. "I don't like to do that, so when I do, it's with a minimum increase so that it won't hurt us or hurt the customers."
Labor shortages have driven up costs
Since the day he opened Kent's Catfish in 2014, owner Kent Randle has enjoyed immense popularity with the Saltillo restaurant.. He moved into a new, larger spot in March, and the crowds have followed.
Randle is buying more catfish than ever, but faces a challenge shared by many other small businesses: The cost of doing business is rising, with little relief in sight. For him, the higher prices for catfish, beef, shrimp, chicken, oil and spices — essentially everything on the menu — are cutting into his bottom line.
"Everything was relatively pretty good until about three months ago, and then everything has just shot up," he said. "Cooking oil doubled, my fish has gone up ... I've had to do more shopping around, even going online. I'm having to shop all the time, looking for the best prices. It's what you have to do."
Quote
Randle currently pays about $200 more per week for the roughly two dozen cases of catfish he buys from his supplier in the Delta.
So why are catfish prices higher? According to Mississippi State University Extension aquaculture professor Jimmy Avery, it goes back to labor shortages.
"I think labor shortage is the big driver in this number. Although there is some talk about tight fish supply, there are no numbers to support it," Avery said. "When supply gets tight either due to low pond inventories or processing shortages, processors shift available product types and volume to long-time customers with high volume and price."
Through May of this year, processing is down 9% compared to the same period in 2020, he said.
Randle's supplier normally runs its processing plant with about 170 workers; lately, only about a third are doing so. That puts a crimp on supply, even as demand remains strong. Which means higher prices.
"They went up $11 a box on the filet catfish and $10 more on the whole catfish," Randle said. "Chicken is crazy, too. It was $1.79 a pound about three months ago and now it's $3.39 a pound. Blackberries — we make a blackberry cobbler on Fridays — a box of them that was $27 a week earlier is now more than $60. So we're going to have to find another fruit to make that cobbler."
Randle has tried to hold firm on prices, but has had to raise some of them incrementally to help cover his costs. He's also paying employees more to keep them on board. The restaurant industry as a whole is facing severe labor shortages, and workers are difficult to come by and keep.
"You just have to pay to play," Randle said with a shrug. "It's just a vicious circle, what we have to ride out."
Scarcity of materials also driving higher costs
In Tupelo, Zack Caldwell does custom woodwork design for his business, Back 40 Customs. Like everyone else in the woodworking and carpentry industry, higher prices are affecting his business.
"Not only are supplies higher, but they are also becoming more scarce. I can't find a half-inch sheet of cabinet grade plywood," he said "As far as the clientele goes, I've had some tell me that they would wait until wood went back down. But many just tell me to go ahead. I figure with the interest rates being as low as they are and all the free money floating around, it's not causing many to blink an eye."
Not all business owners are tackling inflationary pressures. Shirley Hendrix, who owns R&B Speciality Printing in Tupelo, has seen her business grow during the pandemic. She's printing more customized T-shirts, signs, banners and other products than ever before.
"I've really not seen an effect on my business, to be honest," she said. "But now I am real cautious about materials that I order that might put me in a bind if I don't have them. So I make sure I have what I need, when I need them, in-house. I've seen gas prices rise, which affects me some, but as far as the materials I need to run my business, I haven't seen any big increases."
Price-shopping, seasonal sales mean lower profits
In Mantachie, Sam Farris opened Sam's Town Market, a grocery and meat market, almost two years ago in the small town of about 1,200 residents.
With consumers more price-sensitive, he's noticed his revenue fluctuate more broadly than even during last year's pandemic-driven meat shortage.
"Consumers are increasingly price comparison friendly, constantly looking for the best deals," Farris said. "We've seen regular customers reduce their weekly visit counts as well as their average ticket total, evidently because they are being spread so thin over rising costs across the board, not just at the grocery store."
As a Mantachie native, Farris said he's doing what he can to help his friends, neighbors and customers absorb the higher costs.
"We try our best to offer the fairest prices we can to ensure our customers have affordable access to products they need for happy healthy lives," he said. "If that means cutting our margins for a few weeks until things regulate, so be it. I'm not in it, personally, to get rich. I'm here to provide for the good honest people in my area."
With students returning to school, retailers are offering discounts to customers, even as their costs continue to rise. Brandon Davis, who owns of Shoe Country Warehouse in Tupelo, said his costs are increasing about 5% across the board for the fall, which began this month.
Quote
"The good news is the vendors held off on increasing for Spring 2021, which was February to July," he said. "We are now buying for Spring 2022, and they are getting additional increases of 10%."
That means a shoe that cost $130 last month will cost about $150 by the time spring rolls around.
"The inflation situation is coming, and it's unavoidable," he said. "But our No. 1 problem is our shipments are not coming in on time. We had one athletic vendor ordered for July 10 and they said we will get 90% by Sept. 25. That's a hard way to keep the balance of inventory."
Fortunately, SCW has an additional warehouse where it keeps some 5,000 shoes to minimize the impact of short shipments.
"We will be OK, but it sure isn't easy for planning," Davis said.
If inflation continues, consumers will suffer
If it current trend continues and inflation continues to grow, it could hurt the overall growth of the economy.
According to Curtin, the Consumer Sentiment Index shows growing concerns over rising prices are already leading to a decline in buying conditions for big-ticket items.
"Inflation has put added pressure on living standards, especially on lower and middle-income households, and caused postponement of large discretionary purchases, especially among upper-income households," Curtin said.
Quote
Sheila Gordon of Booneville said she's definitely noticed higher costs on the goods she buys.
"I just know that when I'm shopping now, whether it's at the grocery store or gas or whatever, I'm going to end up paying more than I want," she said.
While she is shopping around more than previously, she doesn't expect it to do much good, saying prices are "all going to be about the same."
West Alabama native Angela Cline is also on the front lines of paying higher prices. Cline went back to school shopping for her two elementary aged kids last weekend to take advantage of tax-free sales.
Having to pay more for groceries and other essentials put more strain on what is already a tight budget, she said.
"I really don't know why everything's so high," she said. "Last year, when we had COVID, you couldn't get a lot of things and stuff was high. But now, it seems even though you can get everything, it's still high. I don't get it. But we need it, so we just have to pay it."
dennis.seid@djournal.com
