Thu, May 29, 2008
Dow’s Costs Are Up. Yours are Next.
In response to rising natural gas and petroleum prices, Dow Chemical announced yesterday that it would increase some of its basic and specialty chemical prices by as much as 20%. The effect of Dow's increases won't be felt immediately by consumers, but expect other companies to follow suit. Smart shoppers will need to become smarter.
Bloomberg.com, noting that Hershey, General Mills, and other consumer-oriented companies are already reporting rising inventory costs, predicts that many companies will be raising their prices wherever they can. Paper goods manufacturer Kimberly-Clark initiated increases of 4-7% earlier this year and has announced further price boosts of 6-8% taking effect this summer.
Many of Dow Chemical’s commercial customers have long-term contracts that will hold their expenses steady for a while, but it’s only a matter of time before their costs go up. Dow’s increases will make their way into a wide range of consumer products; cleaning products, paper and plastic products, diapers, and packaging (among other things) will eventually reflect the increased cost of Dow’s commodity chemicals. Dow also reported that its energy expenditures have quadrupled since 2002.
Dow’s move also makes it easier for other commodity and specialty chemical companies to hike their prices in the near future.
Look for price increases on all sorts of household goods, coming soon to a store near you. This is an area where many households are already experiencing increased spending. I’ve spoken to several people who feel that their spending is out of control, but at the same time they don’t perceive that they’ve changed their lifestyles. My suspicion is that they’re right: they are buying the same things that they’ve always bought, but they’re paying significantly more for those items than they did one or two years ago.
I wrote briefly about increasing food costs in an earlier post and suggested some resources to help you control grocery spending. A friend with much more experience in such matters disagreed with the author of one of the blogs I cited. This friend (I’ll call her EH) disputed the notion that frequent shopper cards can’t save you money in the long run. She described her own experience at CVS, where she’s purchased about $900 worth of merchandise (over a period of time) while spending less than $100 through judicious use of coupons and a CVS card. She cited the MoneySavingMom blog as the source of her CVS savvy.
EH also sent me a link to this “Nine Coupon Myths Debunked” post from the same blog. I’m an amateur in this area, but EH is obviously a pro — my hat’s off to anyone who can cut her expenses by 90%!
One further thought: I’m generally opposed to hoarding, but if there are specific non-perishable items that your family uses a lot (e.g. diapers) and you have unused storage space, it wouldn’t be a bad idea to stock up on such items if you find a good sale. It could easily be a year or more before energy and commodity prices start to ease.
