Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

“Transitory” Inflation Strikes Again: FedEx Announces Big Rate Hikes

  by    0   0

In yet another sign “transitory” inflation might not be so transitory, FedEx has announced plans to significantly hike shipping rates in 2022.

FedEx said it will raise rates for US domestic, export and import services by 5.9%, on average next year. Some freight rates will rise as much as 7.9%. The company also plans to raise its Ground Economy rates along with fuel surcharges. The rate hikes will go into effect on Jan. 3.

This represents the biggest increase in shipping costs in more than a decade.

The company says the price increases are necessary due to a “challenging operating environment.” That corporate-speak for “our prices are increasing and we are going to pass along those costs to the customer.”

UPS will release its 2022 rate increases in the coming weeks. It is expected to follow FedEx’s lead. The companies have raised rates essentially in lock-step since 2010, according to Transportation Insight LLC. UPS has already announced an increase in fuel surcharges.

Large companies typically negotiate shipping rates lower than the public, but they will see a significant increase in their shipping costs as well. Typically, these annual rate increases would come in around 2.5 to 3%. According to shipping consultants quoted by Fox Business, some large shippers have received contract renewals that would cap their annual increase at 5% in recent weeks.

As a Fox Business article noted, these rate hikes will put pressure on companies that provide free shipping such as Amazon and Walmart to raise prices or find other ways to offset higher costs. This illustrates how inflation spirals. Rising prices in one sector force other sectors to raise prices which leads to price hikes elsewhere in the economy.

The combination of increased parcel rates, as well as cost pressure from labor and other supply-chain inflation, could lead retailers of all sizes who have counted on online sales for growth to re-evaluate some of their longstanding offerings, according to shipping consultants. Free shipping could go away or the threshold to avoid shipping fees could rise. Costs online and in store could diverge. Some merchants may elect to sell some large items only in-store.”

Consumers are already dealing with significant price increases. If you annualize the year-to-date increase in CPI through the first 8 months of 2021, it would come in at 6.3%. Producer prices are rising even faster.  Annualized PPI is up 10.5% on the year, a full 4% ahead of CPI. The big divergence between CPI and PPI doesn’t bode well for the consumer. Companies can’t eat diminishing margins forever. At some point, they will pass on these rising prices to consumers.

Some companies may have held off on raising prices in the hope that inflation really will be transitory and that price pressure would eventually ease. But it’s becoming increasingly clear that these price increases are forever. Do you really think FedEx will cut rates at some point down the road? As the transitory inflation narrative continues to unwind, more companies will likely begin passing on these higher costs to their customers.

As Peter Schiff said in a tweet, “Consumers will get hit much harder in 2022 than in 2021!”

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

Investors Fleeing Housing Market as Bubble Deflates

In another bad sign for a housing bubble that is quickly deflating, investor purchases of single-family homes tanked in the third quarter. Meanwhile, overall home sales continue to tumble and prices are falling.

READ MORE →

Consumer Confidence Declines for Second Straight Month

The powers that be keep telling you that the economy is fine and inflation has likely peaked. But you’re not buying the story. Consumer confidence fell for the second straight month in November as worries about inflation and the trajectory of the economy persist.

READ MORE →

Recession Warning: US Small Businesses Struggling to Pay Rent

In another sign of a struggling economy, small businesses are having an increasingly hard time paying rent. According to Alignable’s November Rent Poll, 41% of US small businesses reported they couldn’t pay their rent in full and on time in November. That was a 4 percentage-point increase from the previous month.

READ MORE →

War on Cash: India Rolling Out Retail Pilot Program for Digital Rupee

We recently reported that the Federal Reserve plans to launch a 12-week pilot program in partnership with several large commercial banks to test the feasibility of a central bank digital currency (CBDC). The US isn’t alone in experimenting with digital currency. India is working on developing a digital rupee and recently announced the second phase […]

READ MORE →

China Likely Stockpiling Gold to Minimize Dollar Dependence

China is likely quietly stockpiling gold in a bid to further minimize its dependence on the US dollar.

READ MORE →

Comments are closed.

Call Now