Inflation has skyrocketed at an intimidating rate – the latest U.S. Department of Labor data showed a 6.8% increase from November 2020 to November 2021, the fastest increase since 1982.
Inflation is likely to affect life and the economy in Fairfield County, but to consumers it may -pear less as a direct increase in costs and more in the form of a persistent energy shortage.
According to Khawaja A. Mamun, associate professor at Sacred Heart University and director of the business analytics masters program at the Fairfield school, this could have the greatest local impact, especially as winter sets in.
“The price of heating oil is up nearly 60 percent, and many homes in Fairfield County use oil for heating,” Mamun said. “This will take a big bite out of your wallet.”
The price hikes, which consumers are directly seeing, Manum described as the result of several factors made worse by the pandemic.
“Number one is increased demand,” he said. “For a long time, people have come across a bottleneck for many, many things. And now they ask for these goods. As you’ve seen, Amazon had a very good Thanksgiving weekend, but now people want to go out, drive, and meet their friends in restaurants. “
“The second part of the equation is the disruption of the supply chain,” he continued. “Not just the international ports of Los Angeles or New York, but also within the US, slowdowns in gasoline and oil movements, the shortage of truck drivers – it’s a lot of things that create a domino problem.”
These elements feed each other, Manum warned, increasing demand while reducing supply with predictable results.
With global supply chains still tight, and the scarcity of key materials and components holding back production in all industries, the less direct impact of inflation is still a concern of Fairfield County’s business community. Mike Roer, president of the nonprofit Entrepreneurship Foundation, noted that smaller startups face a near future of uncertainty.
“Aside from the obvious challenges,” said Roer, “inflation makes pricing a guessing game, especially for bespoke products that require manufacturers to price the product today and then buy components at an unknown price in the future.”
This uncertainty is also what Manum says may be more critical to understanding the local impact of inflation: he believed consumer confidence to be the statistic to watch, even if these numbers send mixed messages.
In January 2020, data intelligence firm Morning Consult released a consumer confidence card that showed Connecticut in a calm, pale blue image – this gave a Consumer Sentiment Index (ICS) of 107.3 out of 120, slightly below the then national one Average, but this still suggests that those surveyed by the company on a daily basis believe that the economy is doing well and the future is much more likely to be good than not.
In the latest November state coverage, Connecticut is a pale laugh, indicating an ICS of 90.8. The state’s ICS peaked in June 2020, and -art from a brief respite in the summer of 2021, when hopes for the economy and victory over the coronavirus were high, confidence in Connecticut fell like any other state.
While lower consumer confidence is widely seen as a negative sign, Manum believed it could be a way out of the current inflationary trend. Should the rising demand for finished products fall, manufacturers and shipping could have the chance to catch up with the existing demand and better prepare for the next increase.
However, last year’s historic wage increases could persist, although Manum believed this was only a relatively small contribution to the current wave of inflation.
“Of course when people have more money they tend to spend it,” he said. “But the savings have also increased, which is good. So there is an increase in people with extra cash in their pockets, which is fueling some of this sudden demand. “
Inflation could slow in the coming months, driven in part by the forces Manum identified, according to a forecast by . However, wage growth in all sectors, especially the services industry, could continue well beyond the final end of the pandemic as labor shortages persist – and a forecast released by the Conference Board of forecast wages for new hires and workers in blue and manual services jobs are moving faster than average grow.
What this means for Fairfield County can vary widely from parish to parish. The benefits of wage growth for workers in cities like Stamford, Bridgeport and Norwalk could benefit communities and local businesses that are now serving customers in a stronger financial position. At the same time, small businesses in smaller communities could struggle to pay higher wages and then face difficult decisions about whether to cut margins, raise prices, or cut staff.