BOSTON (State House News Service) – Higher prices at grocery stores and retail shops and for energy are likely to stick around for much of the next year as the same supply chain stresses and inflation-driven price hikes that have put a damper on some economic activity this year persist, a panel of business leaders said Thursday.
“We’re seeing an inflation rate that is about two to three times what we saw in 2019 and 2020 … We’re seeing cost increases five times that we saw in 2019,” Stop & Shop President Gordon Reid said, explaining that just about every supplier is dealing with either labor, transportation, energy or raw materials headaches. “Last year and during the COVID, the suppliers were selling 100 percent of what they could make. The challenge this year is they can’t make it, which is a whole different scenario.”
Speaking as part of a panel hosted by the Greater Boston Chamber of Commerce to provide an outlook on the 2022 economy, the grocery chain president added, “We see some of these challenges all the way through 2022.”
At many grocery stores across Massachusetts, shelves are less crowded than they used to be as manufacturers pare back offerings while they contend with labor and materials shortages. Reid said shoppers should be prepared for the diminished range and assortment of products to continue into the new year.
“Paper goods, juice boxes, spices and pet foods are a challenge. Meat and poultry will continue to go up in price because there’s plenty cattle, there’s plenty hogs, there’s plenty chickens, but there’s no one there to process them. And that’s the challenge and it’s, again, just supply and demand.”
Complicating the supply side of the equation are the disruptions to the supply chain caused by increased e-commerce demand during the pandemic, global shipping complications like the Suez Canal blockage in March, port shutdowns related to the coronavirus, and a shift among shippers “from just-in-time inventory to just-in-case-inventory,” Mike Meyran, port director for the Massachusetts Port Authority, said. He said Thursday that many of those issues are not going away any time soon.
“I think the expectation is that what you see today will continue through at least the better part of next year,” he said. “You can see some easing, some actions being taken, some big actions being taken, across the U.S. to make goods flow faster, but I think you could expect to see pain in the supply chain for the better part of next year.”
Penni McLean-Connor, executive vice president at Eversource Energy, said natural gas and electric customers are facing steep price increases from “all-time lows” as energy demand dropped during the pandemic. She said natural gas demand is rising both among homes and businesses and that the supply is tight because producers are still ramping back up from having scaled back on production during the pandemic.
Eversource rates are locked in for the next six months, she said, but customers can “expect those prices to come down during the summer” as production increases again.
The state of the COVID-19 pandemic also has a tremendous impact on the economy. As the Omicron variant comes into view and as cases again spike, Reid said that Stop & Shop is starting to see people go back to shopping for groceries online.
“We’re getting back to some of the pandemic levels in terms of penetration, so people are obviously getting concerned about going out and about and are starting to shop online again,” he said. He said that panic buying “has picked up slightly” as well.
The next economic measure of inflation will come Friday morning at 8:30 a.m. when the Bureau of Labor Statistics is due to report the latest Consumer Price Index data.
“Do not be afraid when you hear the headline number … right now the estimate is 6.8 percent. We could have a number that starts with a seven. That’s going to shock an awful lot of people,” John Traynor, chief investment officer at People’s United Bank, said during Thursday’s forum.
Traynor said he is estimating 5.6 percent growth for the fourth quarter of 2021, which he said would provide the economy with “a lot of momentum” heading into 2022. His growth estimate for 2022 is 4 percent. Traynor said that the bond market and stock market are both hoping that 2022 will bring a slowdown in inflation.
“We do believe as we enter next year, as the economy grows but it slows a little bit from the pace that we’re at now, we could start to see inflation ebb,” he said.