Spring businesses battle inflation and supply shortages

Spring-area businesses have proven resilient during the ongoing pandemic, local stakeholders said, and the economy has begun to recover even as inflation, labor shortages and problems supply chain persist.

Faced with higher operating costs, experts said companies need to shift some of that burden onto customers. The US Bureau of Labor Statistics reported an 8.3% year-over-year increase in consumer prices nationwide in April 2022, the highest rate of inflation since January 1982.

The Greater Houston Partnership reported unemployment is down locally, from 14% “at the start of the pandemic” to 4.4% in March 2022. About 92% of jobs lost during the pandemic had been recovered by March, which means that there are would take another 28,000 to return to pre-pandemic employment levels.

However, companies won’t be able to increase prices indefinitely to cover their increased costs, said Bobby Lieb, president and CEO of the Northwest Houston Chamber of Commerce.

“At some point…people are going to say ‘No more’ and they’re going to cut spending,” Lieb said. “If a company starts cutting expenses instead of raising prices, that means layoffs.”

Painful price hikes

Since the start of 2021, price increases have been widespread for some items, according to the Bureau of Labor Statistics. Nationally, the cost of meat, poultry, fish and eggs increased by 14.3% from April 2021 to April 2022, while the cost of fuel oil and gasoline increased by 80.5% and 43.6%, respectively.

Fu Manchun Owners Paul Huynh and Taylor Chung announced in March that they were considering closing the Spring-based Vietnamese restaurant. However, after receiving an outpouring of local support, they opted to renew their lease and keep the restaurant open.

“Grocery inflation, among other cost increases, some supply shortages, labor shortage and inconsistency, made it harder for us to want to continue,” Huynh said.

Elizabeth Cleaver, Spring resident and owner of queen mom, has been making moms back for over 30 years. However, Cleaver had to raise its prices for the upcoming school year due to the rising cost of supplies.

“Last October, I ordered about $2,500 worth of ribbon,” she said. “And the next week I was going to order some more, and the girl told me…they took a price increase that morning of 17%,…which is unheard of. seen.”

Jessica and Matthew Lynn opened Lynn’s table in Old Town Spring in April 2020. Since opening, Jessica Lynn said the duo have seen prices for meat, cheese, produce, paper products and disposable gloves increase dramatically.

Meanwhile, the most notable price hike Fu Manchung has experienced is in vegetable oil. Where Huynh used to pay between $18 and $20 for a 5 gallon container, the cost is now $38 to $40, a price hike of 105%.

Consumer prices in the Houston metro have been rising steadily since April 2021, according to the BLS. The consumer price index jumped 8.5% for the region in April from a year ago.

“This inflation is not going away anytime soon,” Lieb said. “There is speculation that it will peak in the fall. … We will probably see it until 2023 before we start to see any recovery. So we haven’t gotten out of it yet. »

Supply chain challenges

Many problems for businesses are related to the supply chain, which was interrupted when nations stopped trading and shipping at the start of the pandemic. According to Patrick Jankowski, senior vice president of research for the GHP, although many ports have since reopened, variant outbreaks still pose a threat to this system.

In February, the US Food and Drug Administration reported recalls of powdered infant formula manufactured by a Abbott Nutrition facility in Sturgis, Michigan, due to reports of illnesses among babies who had consumed the products.

“Manufacturers have increased production by 30% to 50% bringing total production today above pre-recall levels with a different mix of products and sizes now available in the market,” said the US Department of Health and Human Services the website reads. “Yet it’s clear that too many families continue to face challenges getting formula.”

Another major supply shortage is due to the lack of exported grain following the Russian-Ukrainian war. Ukraine and Russia supply about 30% of the world’s grain, according to a May 19 United Nations press release, but Ukraine is expected to export a third less wheat this year than in 2021.

Supply shortages have also impacted local businesses.

While Cleaver orders manufacturing supplies from her mother a year in advance, she said other people working in her industry are struggling with supply shortages.

“There are girls out there hustling [because] they can’t find tape,” Cleaver said.

Lynn’s Table meals do not contain nitrates, genetically modified organisms or high fructose corn syrup, Jessica Lynn said, making ingredients harder to find during the pandemic.

“We diligently source clean items for our menu, and these items have been difficult to remove and put on for many months now,” she said.

Staff shortages

Along with supply chain disruptions, staff shortages have proven to be another challenge for businesses.

Shortages of staff and access to supply lines can be adverse, but Jankowski said he believes they are the growing pains of an economy that has recovered. However, as unemployment has fallen in the Greater Houston Area, compensation costs have also risen, according to a GHP analysis of BLS data.

Compensation costs for private sector workers in the Greater Houston Area rose 4.5% from March 2021 to March 2022. As costs continue to rise for businesses, Lieb said he believes companies would resort to layoffs if they could not cut costs in some other way.

“As we see this high employment number right now, I have a strong fear that we are going to see a massive layoff,” Lieb said.

Mikah Boyd contributed to this report.