Costco Warns of Higher Inflation Ahead of Holiday Season, Dismantling ‘Transitory’ Narrative

Think price pressures stemming from the Covid-19 pandemic are just temporary? Think again.

Even more retailers have joined the already-exhausted and still-growing list of companies sounding the alarm of inflationary pressures that are a lot more than just ‘transitory.’ Just this past week, Costco Wholesale (NASDAQ: COST) announced that it is facing heightened shipping costs, and will be forced to hike prices throughout the upcoming holiday season.

According to a conference call with analysts, Costco’s CFO sounded the alarm of skyrocketing freight costs, which are becoming “permanent inflationary items,” alongside other “somewhat permanent” items such as rising labour costs, material shortages, and higher commodity costs. “We can’t hold on to all those,” Galanti explained. “Some of that has to be passed on, and it is being passed on. We’re pragmatic about it.”

Indeed, According to data from the Bank of America cited by CNBC, overseas shipping container costs have significantly ballooned since the beginning of the pandemic. A 40-foot container shipped from Shanghai to New York was priced at approximately $2,000 just over one year ago; now, that price tag has soared to around $16,000.

Providing further insight on the growing problem, Galanti said that inflation will likely hit anywhere between 3.5% to 4.5% across Costco’s products. In particular, he cautioned that paper product prices have jumped between 4% and 8%, while broad shortages of pet products and plastics have forced price pressures to escalate from 5% to 11%.

The increase in prices will certainly be felt by shoppers, particularly ahead of the busy holiday season. With Halloween, Thanksgiving and Christmas soon around the corner, major retailers are gearing up to pass along an increased proportion of higher costs onto consumers. A number of companies have indicated that consumers are still okay with taking on higher prices— but for how long— is the real money question.

The US government has pumped trillions of dollars into the US economy since the beginning of the pandemic, causing household wealth to swell significantly in the second quarter. But, the Fed this week finally admitted that inflation will be a lot higher this year than previously expected, signalling that monetary stimulus will likely be pulled back come November.


Information for this briefing was found via CNBC and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

Gold Drilling Scaled to 60,000 Meters: How Big Can This Get? | Roger Rosmus – Goliath Resources

Baselode Energy To Acquire Forum Energy: The Merger Of Equals Deal

TriStar Gold: The Revised Castelo de Sonhos Prefeasibility Study

Recommended

Antimony Resources Drills 4.17% Antimony Over 7.4 Metres At Bald Hill

ESGold To Expand Mine Building At Montauban In Advance Of Gold & Silver Production

Related News

Inflation Expectations at Canadian Businesses Soar to Record-High

Despite consistent reassurance from Bank of Canada policy makers that price pressures are merely transitory,...

Thursday, August 26, 2021, 12:02:09 PM

Consumer Prices In Canada Rise 2.5% In July, Slowest Pace Since March 2021

Canada’s Consumer Price Index (CPI) increased by 2.5% year-over-year in July, marking the slowest inflation...

Tuesday, August 20, 2024, 08:48:34 AM

Bank Of Canada: Economists See A Full-Point Rate Hike For July

Strategists at JPMorgan are seeing a full percentage point interest hike from the Bank of...

Monday, June 27, 2022, 04:31:00 PM

German Inflation Soars To Record 8.8% Ahead Of The ECB Meet

Germany saw its consumer prices hike the highest on record–a staggering 8.8% in August vis-a-vis...

Tuesday, August 30, 2022, 12:07:00 PM

Federal Reserve Keeps Rates Unchanged But Plans for March Hike

The Federal Reserve has decided to keep interest rates unchanged for the time being, but...

Thursday, January 27, 2022, 10:04:00 AM