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P&G announces price hikes

April 21, 2021

yearly changes in the personal care products component of the consumer price index chart

Source: Bureau of Labor Statistics

Procter & Gamble issued sales and earnings results ahead of consensus expectations yesterday and maintained its guidance for the remainder of the fiscal year. More notably, the company also said that it would implement price increases for certain products by September. This comes on the heels of similar announcements from Kimberly-Clark, General Mills, and Coca-Cola in recent weeks and suggests that the near-term inflation risks have yet to be extinguished even as consumer prices themselves have remained well behaved to this point in the face of rising input costs.

This developing trend, however, is far from a definitive signal that a sustainable pickup in inflation is imminent. Due to the competitive landscape, there has been virtually no pricing power in recent years in the items currently slated to be repriced. The personal care products component of the CPI, for example, fell by an annualized 0.2 percent across the 2009-20 expansion and hasn’t advanced by more than 2.0 percent in any calendar year since 2006. Similarly, the breakfast cereal CPI moved higher by just 0.1 percent annualized across the last cycle while the infant/toddler apparel category (which includes diapers) rose by only 0.2 percent over the same time frame. It is also worth remembering that the large-scale price increases that P&G and KMB both announced in late 2018 did little to drive broader inflation, as the commodity price increases that helped to precipitate them reversed course and competitive pressures fueled price cuts elsewhere (note P&G’s massive reduction in razor blade prices that year). In this case, the precipitating factors are largely idiosyncratic and are unlikely to be sustained much beyond the pandemic. There are lingering near-term risks here, but still little evidence of a more lasting shift.

Daily Trivia

What film character has long been thought to represent IBM, especially given that its name appears to be an easily-deciphered cryptogram?

Previous Question

Which two countries – whose film industries have rhyming nicknames – rank first and second globally in movie production?

Answer:

India and Nigeria (“Bollywood” and “Nollywood”)

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