The national retail federation predicts Holiday spending in the u.s will rise as Much as 10.5 percent over last year and A big reason for that is just about Everything costs more cbs sunday Morning's david pogue explains why with A crash course on inflation you might Have noticed there's something crazy Going on with the prices of everything Restaurant prices are up five percent Over a year ago Cars furniture meat fish and eggs up 10 To 12 percent Used cars up 24 And gasoline Gasoline is about 50 percent more Expensive than it was a year ago and Heating oil has the same problem it Could be an expensive winter At the heart of all this is one of the Fundamentals of economics Supply and demand as illustrated today By the david pogue thespian ensemble Water here get your dehydrated water Four dollars Three dollars Two bucks When there's a lot of supply And not much demand the prices go down But when there's very limited supply and A lot of demand the prices go way up I got the last two tickets to see lady Gaga Front row right here
Do i hear 800 each 900 The question is Why now Megan It's just eating into people's buying Power so that has real implications on Every american Economist megan green is a senior fellow At harvard's kennedy school and chief Economist at the kroll institute what Did the pandemic do to supply So when we shut down the whole economy That automatically cause disruptions in Parts of a really complex global supply Chain we're seeing huge backlogs in Terms of containers waiting in ports and Ships waiting offshore and that's partly Because of labor so we can't find Truckers or longshoremen in order to get All of these goods off of ships into Ports and onto shelves All right so what about demand as we Reopen the economy there's just been This surge in demand as people go out to Buy stuff On top of that you have the christmas Holiday season coming The spike in gas prices is a different Problem oil companies who lost money During the great lockdown are now Limiting how much oil they produce Oil get your oil Oil get your oil
Oh come on man hey listen buddy during The lockdown you people weren't flying And driving we need all this oil that we Couldn't sell we are not getting burned Again yeah but you're driving up the Prices of gas and food not my problem Pal Oil get you oil If you're old enough you might remember The big inflationary cycle of the 70s And early 80s Mortgage rates at 18 But megan green thinks that this cycle Won't be like that one i actually think What we're facing right now is pretty Different in the 70s we had really high Inflation and really low growth it's Called stagflation But during the lockdown many companies Made themselves more productive by Investing in automation and other Improvements so if we have productivity Growth it doesn't necessarily result in Higher prices Does the fact that our government has Poured trillions of dollars of cash Into the economy play a part in all this So what what the government has already Done certainly has Fed the flames of inflation a bit and it Was sort of designed to do that don't Forget the stimulus was offered in order To get the economy going and jump Started after it had been put in a deep
Freeze and what about the trillions of Dollars yet to come as part of the new Infrastructure spending bill and there I'm a lot less worried the fiscal Stimulus measures on the table are all Due to be deployed over the next 10 Years a lot of it is aimed at Infrastructure spending and because we Don't have many good shovel-ready Projects ready to go infrastructure Spending ends up being kind of Back-ended all right megan so the big Question when will this end what i think Unfortunately we need to see is both Demand to wane and also this backlog in The supply chain to be alleviated and so I think that we'll probably really see Inflation abate in early 2023 So there's your crash course in the Inflationary cycle of 2021 And 2022 and 2023 the pandemic triggered A shortage of almost everything and the Recovery triggered an increase in demand For almost everything things will not Get back to normal until supply and Demand Even out again Diagrams Get your economics diagrams For more on the supply part of the Equation and how it will affect the Holidays let's bring in john quelch he Is the dean of the herbert business School at the university of miami dean
Quelch thanks for being here we were Hurry we were hearing you know some dire Predictions in the last couple of months About nothing being available for the Holidays and that we need to start our Christmas shopping in september What's actually happening Uh the consumer did respond to those Suggestions and Also retailers brought forward the start Of their uh seasonal shopping uh sales In order to spread out the flow of Demand uh between uh In fact late october and the end of the Year so that they wouldn't get quite as Badly hit by spot shortages of supply Resulting in shelf stock outs So the consumer did actually respond to The concerns about supply chain Shortages and a certain amount of the Seasonal buying has been brought forward As a result So how are companies then responding to The choke points in the supply chain Well of course it's in the interest of Manufacturers and retailers to sort out These supply chain problems as soon as Possible they don't want to Lose sales to consumers as a result of Shelf stockouts So they've been working really hard on This issue But as you know The global supply chain shortages
Are Endemic and they do take Months to actually work out as your Previous report indicated there are Labor shortages as well as Misplaced shipping containers and Backups outside of the ports in La and long beach as well as in other Parts of the world so all of this will Take We think around about another four to Five months to work itself through All right uh so dean quilt given what You were saying about uh the Some consumers um Buying their shop doing their shopping Earlier and sort of spreading out the Christmas season which is usually more Contained to this period between Thanksgiving to uh to christmas eve do People who haven't done their christmas Shopping already need to be concerned Uh yes this is not a good year to be a Procrastinator And probably not a good year to be the Son or daughter of parents who are Procrastinators um you know the the Advice would be um if there's something On your uh shopping list that is a Must-have for a loved one and you see it Don't worry about uh haggling over the Price or waiting for a deal because that Deal may not come this year uh you Should take uh take it off the shelf if
You see it and In addition You know probably makes uh sense to shop Around uh if there are items that you Can't find immediately You may need to shop around online Perhaps put Your information on a waiting list Because in some cases retailers actually Do not know uh what shipments they are Actually going to receive from one week To the next given the supply chain Constraints That's a really unusual and important Point uh is there um is there a lesson For Us in the future about what what to do To try and help help better um Straw how better buttress i guess our Economic system so that we don't Experience these types of problems in The future Well of course some people Will will say and have been saying that Uh the lesson is that our global supply Chains are too long uh that we're too Dependent upon foreign sources of supply But the fact is that Those products Even with the lengthy transportation Shipment periods from asia Those products are still being made Typically cheaper in asia than they Could be made
In the us so It's very difficult to Simply Turn the switch off global supply chains And have everything be Made domestically the skill sets are not Necessarily in abundance here And in addition the Cost of production That much higher Labor may also be not that readily Available so What we have to do is i think have Stronger what we call buffer inventories In the system Those are inventories that are held in Reserve at different points in the Supply chain in order to deal with uh Unexpected uh disruptions in the in the Supply process All right dean john kwelch thank you so Much for joining us My pleasure alana thank you
