We import components used by manufacturers (assemblers). We held prices while we sold off pre-tariff inventory, and our prices have now increased. Our customers will soon be putting higher cost products out for sale, and they will not take a margin hit - the higher prices are coming.
Having worked in apparel many (many) years ago, the markup at each distribution point is about 100%. So plenty of scope to meet the market. Turnover is the name of the game, and stock must be moved at any price. Margins will only really be affected when stock *stops* moving, wages and rent will then eat the profit, and retail chains will abandon tenancies (and staff).
We are not buying stuff. I have cut back especially hard on buying new clothes. Fast fashion is out of fashion. Economists, we are just NOT cooperating with consumerism like we once did. For me, that change is permanent. Don’t think I’m alone.
Excellent deep dive. Would be interesting to see the same look at vehicles.
Also, the impact of the steel and aluminum tariffs as intermediate inputs feed through to final consumer prices. Not suggesting that you should do those jobs, Dr. Sahm. But, I'm sure we'll see analysis of those sectors soon from lots of people.
All the chaos generated by the Trump administration on every imaginable front - including international trade - has a potential latency component with a corresponding component of unpredictability. That said, thanks for providing, as always informative data and useful analysis.
Consumer prices have a built in "buffer", AKA a markup. Companies try to maximize their profit margins, so they charge whatever they can get away with. Manufacturer charge what they can get away with, wholesale distributors mark it up as much as they can get away with, and finally the retailers mark up as much as they can get away with - sometimes as much as 80%.
Thus, when you see a "sale" of "10% off!" it's 10% off the already grossly inflated markup, and the business still makes out like a bandit. This applies to the tariffs as well. Just my casual observation.
The graph that shows overall prices have declined….does that figure adjust for a changing marketbasket of goods? Buying less dress suits and more T-shirts, etc…
We import components used by manufacturers (assemblers). We held prices while we sold off pre-tariff inventory, and our prices have now increased. Our customers will soon be putting higher cost products out for sale, and they will not take a margin hit - the higher prices are coming.
This is super interesting and insightful, Claudia. Thank you for breaking this all down.
Having worked in apparel many (many) years ago, the markup at each distribution point is about 100%. So plenty of scope to meet the market. Turnover is the name of the game, and stock must be moved at any price. Margins will only really be affected when stock *stops* moving, wages and rent will then eat the profit, and retail chains will abandon tenancies (and staff).
Dang, I should have read your comment before posting mine. You beat me to it.
We are not buying stuff. I have cut back especially hard on buying new clothes. Fast fashion is out of fashion. Economists, we are just NOT cooperating with consumerism like we once did. For me, that change is permanent. Don’t think I’m alone.
I'm certainly with you on this. Undercapitalization notwithstanding, I buy only what I absolutely need.
Excellent deep dive. Would be interesting to see the same look at vehicles.
Also, the impact of the steel and aluminum tariffs as intermediate inputs feed through to final consumer prices. Not suggesting that you should do those jobs, Dr. Sahm. But, I'm sure we'll see analysis of those sectors soon from lots of people.
Well, we know of one vehicle that's taking a big hit - TE卐LA!
All the chaos generated by the Trump administration on every imaginable front - including international trade - has a potential latency component with a corresponding component of unpredictability. That said, thanks for providing, as always informative data and useful analysis.
Consumer prices have a built in "buffer", AKA a markup. Companies try to maximize their profit margins, so they charge whatever they can get away with. Manufacturer charge what they can get away with, wholesale distributors mark it up as much as they can get away with, and finally the retailers mark up as much as they can get away with - sometimes as much as 80%.
Thus, when you see a "sale" of "10% off!" it's 10% off the already grossly inflated markup, and the business still makes out like a bandit. This applies to the tariffs as well. Just my casual observation.
The graph that shows overall prices have declined….does that figure adjust for a changing marketbasket of goods? Buying less dress suits and more T-shirts, etc…
No, the weights on the basket are only changed once a year in the CPI.
It tells me that the Keynesian Economists, that thought we'd have Tariff-related Inflation,
have been dead wrong, so far...
Tariffs are mainly Deflationary.....I will say it, again...
You don't need a PHD to understand that.....
So was Trump right in saying "foreigners would pay for tariffs"?
Overall import prices are not down, but apparel does look like an industry where foreigners are paying a portion (so far).
Pay to play, would you rather be busy and feed your family or laid off and watch them go hungry?