Li & Fung, which supplies products for companies like Walmart and Gap in the US and Debenhams in the UK, said “a new era in sourcing with higher prices” has begun as manufacturers pass on the rising costs of raw materials and Chinese labour to customers.
Bruce Rockowitz, president of Li & Fung Trading, said: “The biggest topic on the minds of everyone in this business is that higher prices are really here to stay. At this point, retailers are not sure what they can pass on to consumers and what they cannot."
It's technically incorrect to say that manufacturers "pass on" price increases, as the company said. When a manufacturer is facing higher prices, what is really going on is that it is facing higher bidding for its raw materials. That's what Li & Fung is facing.
As Rockowitz more correctly notes, it is not clear that consumers will buy in the same quantities, given the higher prices, but the higher prices are here to stay, because Li & Fung are facing higher prices for their inputs.
This same higher price phenomena will be experienced by retailers through out the United States, first by clothing retailers, but overtime it will be much more broad based than clothing retailers. The Fed has printed a lot of money and that money has gone around the world and is now allowing foreigners to bid for goods against Americans.
It won't be pretty, but it will be expensive for all of us.
http://www.economicpolicyjournal.com/2011/03/prepare-for-inflation-era-of-cheap.html
