Kickstart: 'A long bout of inflation' but no need to panic

Inflation may have cooled slightly last month, but Plastics News Economics Editor Bill Wood wants to make a couple of things clear: Expect higher prices to be around for a while, but don't fall into panic mode about the potential for recession.

"Nobody has a sufficient understanding of inflation to make any kind of credible forecast about the future," he said after the latest inflation numbers were released May 11. "That 35 percent probability of a recession forecast [being discussed by some groups] is just (euphemistically speaking) comical."

That's not to say recession won't happen, but rather that recession is always a possibility. But no one can say with certainty that it will happen "in the near future."

As long as consumers are willing to keep paying higher prices, the economy is in a "type of feedback loop," he said.

"Our readers should be prepared for a long bout of inflation. There are a number of things they must do, but for many, it will take a lot of hard homework to learn what they need to do to ride this out," he said. "Those who do the work will most likely be the ones that thrive in the future.

"In other words, this is an opportunity to gain a competitive advantage. In this environment, the stress on the industry is increasing. The strong competitors will find a way to gain an edge. The weaker ones will sustain real damage," he said.

Want more insight? Bill's monthly column on larger economic issues and the plastics industry focuses on lessons from building and construction statistics. And on May 24, PN subscribers can tune into Numbers That Matter Live, a livestream about economic issues.

Another thing that's not going away soon? Shipping and logistics issues.

PN's Frank Esposito writes that Michael Jakobsen and Dan Fries, executives with Denmark-based global freight hauler DSV Air & Sea, said at the Silicone Conference in Cuyahoga Falls, Ohio, that the reliability of shipping deliveries is currently maxing out at 30 percent. That compares to a typical 65 percent.

Shipping container fees, which were $3,000, can now reach $20,000. Congestion in ports is slowing schedules, while fuel prices climbed following Russia's invasion of Ukraine.

"At the end of the day, we're trying to control an industry that depends on the ability to keep things moving," Fries said. "We feel the same pain you do."

German auto supplier Leoni AG, a maker of wire harnesses, was among the first international companies that needed to change the way it did business when Russia invaded Ukraine in February.

It is now becoming one of the first to show how it can adapt and continue production while keeping its workers safe.

With 7,000 employees in western Ukraine, Leoni had halted production when the war began, but workers petitioned to stay on the job, Leoni executives told Bloomberg. (You can find a copy of Bloomberg's story here at our sister paper Automotive News Europe.)

But to keep workers safe, Leoni made some changes:

• It found and improved bomb shelters nearby for workers to use if needed.

• Workers keep personal items at their workstations in case they need to head to the bomb shelter.

• Leoni recruited women to make cross-border deliveries because men of fighting age must remain in Ukraine in case they're needed for the war effort.

• Returning to work remains voluntary. Employees who don't feel safe returning to the job can still be paid.