Warren Buffet, the world’s richest investor, warns of imminent inflation hitting the US economy, amid a stronger-than-expected recovery from the Covid-19 pandemic.
Speaking at an annual shareholder meeting on Saturday, Buffet said his Berkshire Hathaway portfolio, which has a stake in a variety of companies including Dairy Queen, Duracell, and Apple, is “seeing very substantial inflation,” as the economic recovery continues to heat up. “It’s very interesting. We are raising prices. People are raising prices to us and it’s being accepted,” he continued.
Buffet attributed the alarming price pressures to a high savings rate among those Americans that were unable to spend money on things such as dining out and vacations during lockdowns, as well as widespread raw material shortages. Berkshire Hathaway also owns Clayton Homes, one of the biggest homebuilders, along with Benjamin Moore paints and Shaw flooring. “We’ve got nine homebuilders in addition to our manufacture housing and operation, which is the largest in the country. So we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day they’re going up,” Buffet added.
Prices for goods and services have been accelerating across the US mainly due to demand-pull and cost-push inflation. The latest $1.9 trillion stimulus bill deposited $1,400 into eligible Americans’ accounts, prompting a surge in demand for items that were already suffering from pent-up demand. To make matters worse, producers and manufacturers are noting significant cost increases for input materials, which are then relayed in higher prices for consumers.
Despite the broader signs of price pressures, Fed Chairman Jerome Powell continues to downplay any worries, instead noting that any sort of inflation that does erupt, will only be “transitory.” The Fed has stated it will not increase interest rates until the economy reaches full employment and any negative economic effects stemming from the Covid-19 pandemic subside. Nonetheless, high prices could put further pressure on stocks, as inflation diminishes the future value of company profits, as well as cause a surge in Treasury yields.
Information for this briefing was found via CNBC. 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.