“Generally, I’m pretty optimistic,” said Jim Bowman, president and CEO of Noble Tool Corp. in Dayton.
The consumer price index recorded a year-over-year increase of 9.1% in June, up 1.3% from May, the fastest annual increase since the end of 1981, according to federal figures released in mid-July. (The next CPI report is due Wednesday.)
In a four-state region that includes Ohio, inflation is even higher, nearly 10% in June, compared to June 2021.
“Rising interest rates make people think”
Higher interest rates are part of the pain as the Federal Reserve tries to slow inflation. On July 27, the Fed raised interest rates for the fourth time in five months.
Higher rates affect everyone who uses a car on credit, buys a car or buys a house. Nationally, sales of existing homes fell for five months. In the Dayton area, sales of single-family homes and condominiums reached 1,596 in June, down nearly 8% from June 2021, according to trade organization Dayton Realtors.
Donna Darner, 54, rents in Kettering with her husband. They are looking to buy a larger three-bedroom house not too far from where she works for the Moraine town government.
“I see houses that I really want, and I know that I can’t afford, especially because of interest rates,” Darner said.
It’s still a seller’s market, said Eric Groff, a realtor with NavX Realty and Darner’s agent. But he detects a “softening” of this. Homes that may have sold in 48 hours or less three months ago may now be on the market for 10 to 15 days, he said.
“I think these higher interest rates are making people think,” he said. “They are a bit more selective.”
The 30-year fixed mortgage rate averaged 5.52% as of August 4, down slightly from the previous week. A year ago, mortgage rates averaged 2.80%.
Tenants are not spared. According to Rent.com, the average rent for a studio apartment in Dayton is $875 in July, up 16% since July 2021. The average rent for a one-bedroom apartment here is $962, up 4% over the same period. (Rent for a three-bedroom apartment, however, is down 1% to $990.)
But it’s complicated. Some observers say they detect a slight stabilization, at least for some prices.
“It’s a strange market to deal with at the moment,” said Chuck Dryer, territory manager for Kent-based Industrial Tube and Steel, which also has a presence in Butler County’s West Chester Twp.
This very important regular expense, gasoline, has come down in price. Gasoline prices have fallen for 49 consecutive days, as of August 2. In Ohio, the average price of a gallon of regular unleaded was $3.87 as of Aug. 3, according to the Oil Price Information Service.
Yet that average was even then $1 or more than it was around the same time last year.
Food remains expensive, but there are signs that inflation is slowing there. U.S. consumer food prices rose 10.4% in June from the previous June, but world wheat and corn prices have fallen in recent weeks.
“Trying to Hold the Line”
Noble Tool’s Bowman said he encountered few major difficulties in securing the major components he needed, such as cold-rolled steel and aluminum.
The biggest challenge is more on the maintenance side, he said. If an engine fails, it may or may not be of foreign origin.
This spring and early summer, prices were rising so rapidly that job postings could quickly become stale. Bowman said he was trying to keep quoted prices stable for 60 to 90 days.
“It’s starting to get a bit over the top, and it’s kind of cutting into our margins,” he said. “But we take the risk of maintaining our prices, because we quote every job.”
Chuck Dryer of Industrial Tube and Steel saw material prices increase at his supplier. Like Bowman, he lives — and transpires — in the time between when a customer places an order and when his company receives the materials to fulfill that order. Prices may rise in the meantime.
“So you’re constantly trying to balance and keep them (customers) informed of what’s going on,” Dryer said.
“We’ll try to eat some of it (the most recent price increase) if we can,” he added.
A year ago, these rapid increases might have come as a shock. These days, more and more customers seem numb, Dryer said.
Help wanted – again
The war in Ukraine led to three base price increases in March alone for the cost of structural steel, a cost that rose about $550 a ton, Dryer said. At the end of 2021, there had indeed been price cuts.
But from early to mid-July there seemed to be some price stabilization, although changes in material availability could still be a problem, he said.
The result is that customers can be a little “shy,” Dryer said.
Dryer’s company isn’t considering layoffs and he sees a desire for skilled workers wherever he travels.
“I cover Dayton, Columbus, Indianapolis, and I see about 15 ‘help wanted’ signs a day,” he said.
Detailed machining also takes applications. Bertsch said in late July that he needed to fill a few positions.
But he is choosy about his hiring.
“We’re kind of picking and picking a little better,” he said.
“We accidentally isolated ourselves”
Beth Flippo, CEO of Drone Express, said supply chain issues and inflation have actually benefited her fledgling drone delivery and logistics business.
Because Drone Express needed to keep its drones and components mostly made in the United States, it was able to avoid delays and issues that slowed overseas shipments to other companies, Flippo said.
“We accidentally self-isolated,” she said. “I’d love to take credit for that, but we’re actually in a great position because these planes (Drone Express drones) need to be produced in the United States, we were very lucky.”
When will inflation end?
Rea Hederman — executive director of the Center for Economic Research and vice president of policy at the Buckeye Institute think tank — is bearish on the notion that the end of inflation is nigh.
He warns that declines in food and gasoline prices reflect sectors where prices tend to rise and fall rapidly. And he sees a chance that “structural inflation” will take root as upward pressure on workers’ wages mounts.
“The causes of inflation have started to change,” he said.
Inflation caused by supply chain pressures is starting to ease. Now the inflation is happening in services – child care providers, restaurant meals, haircuts and other services.
More and more workers agreed to change jobs during what was called the “great resignation”. In response, some employers raised wages.
“It creates almost structural inflation where wages and prices rise in tandem,” Hederman said. “The bad news for workers is that wage increases are not keeping pace with price increases.”
He sees inflation as a problem until at least next year.
“The more permanent areas of inflation have continued to rise at a faster pace.”
The Dayton Daily News will examine the impact of inflation on the region over the next three Sundays.
Today: Business supply chain costs, hiring employees and rising interest rates are being felt locally.
August 14: Construction costs for the local school building, roadway or new bridge skyrocket, causing delays.
August 21: That burger, milk, or new school supplies cost more. What inflationary costs are doing to our purchasing power in the Dayton area.