New York factories, retailers hiking prices because of difficulty in obtaining supplies

Nearly 4 in 10 factories in New York State are raising prices on the goods they make as it becomes more difficult to obtain raw materials, a sign that inflation could worsen, economists said.

The Federal Reserve Bank of New York found 48% of manufacturers had a tougher time getting supplies this month compared with April, according to a new poll.

In a separate survey, more than 2 in 10 retailers and service-sector firms in the metropolitan area said they had increased prices because of supply-chain disruptions in the past month. Thirty-two percent said they were having difficulty obtaining products and materials.

Severe supply shortages in 2021 led to a spike in consumer prices as the U.S. economy was recovering from the COVID-19-induced recession of a year earlier. The rate of price rises has since moderated to about 4%, year over year.

Now, “the high shares of firms raising prices in response to supply-chain disruptions may well be contributing to inflationary pressures in the economy,” New York Fed economists Jaison R. Abel and Richard Deitz said in a report released this month. They also said increases in the Consumer Price Index are about double the 2% pace that the Federal Reserve requires to lower interest rates.

“Supply-chain disruptions remain significant and are restraining business activity for many firms in the region, though much less so than in 2021,” the economists said in the report.

The bank polled about 125 manufacturers across the state and about 200 retailers and service firms in the metro area between May 2 and 9, with Long Islanders participating in both surveys.

The polls show the availability of supplies for factories and service firms “had generally been improving since early 2023, but over the past couple of months, improvement has stalled,” the economists said.

Besides raising prices, just under half of the manufacturers and about a third of the service firms surveyed have reduced their operations as supplies have become hard to come by. Few have laid off employees or reduced their hours.

Supply-chain disruptions are commonplace and often are the result of natural disasters, wars and other geopolitical events, according to Charles J. Haugh, who worked in supply-chain management for more than 40 years before co-founding the business consulting firm HRH Partners LLC in Kings Park.

"This has always been going on but many, many companies have no supply disruptions because they're well prepared," he said on Wednesday. "They have secondary sources [of supplies], they have inventory on hand." 

Haugh, and business partner Jonathan D. Rosenberg, said businesses that experience supply shortages don't anticipate them. Others are still trying to fill orders received during the pandemic when overseas shipping was curtailed.

"Those companies that have serious backorders because they didn't have the raw materials [in 2020-21] — they're the ones that you are probably hearing from about supply-chain disruptions," said Rosenberg, who spent 24 years as a supply-chain manager.

The New York Fed will begin in June to release monthly supply-availability indexes based on feedback from factories across the state and service firms in the metro area, according to the economists.