Report shows businesses are not yet passing all increases in costs on to consumers

Posted at 6:29 PM, Apr 13, 2022
and last updated 2022-04-13 18:49:47-04

DETROIT (WXYZ) — 7 Action News met Dominique Da'Cruz as he worked to make Cruz Burgers.

“It’s great. We call it an old school burger with a new school taste,” Da’Cruz said.

The Detroit dad and his family fine-tuned the recipe as the pandemic reminded them that life is short and health is precious. They launched the product in 2020 and now are selling it in 11 local grocery stores.

“No. 1 ingredient in it is mushrooms,” Da’Cruz said.

Mushroom prices, like so many things, have skyrocketed.

“We were paying about $2.15 a pound. Now, I am hearing about $2.90 a pound for mushrooms, our main ingredient,” Da’Cruz said.

He is not alone. We told you Tuesday consumer prices increased 8.5% annually as of last month, according to the Bureau of Labor Statistics Consumer Price Index. Wednesday, we learned the prices businesses pay to produce the things we buy went up even more, as the Producer Price Index report was released.

"On an unadjusted basis, final demand prices moved up 11.2% for the 12 months ended in March, the largest increase since 12-month data were first calculated in November 2010," a summary of the report released by the Bureau of Labor Statistics read.

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“The Consumer Price Index will generally follow the producer price index. So, it is a good leading indicator of what is to come,” said Sandy Baruah, the Detroit Regional Chamber president.

Baruah says the Producer Price Index increasing may mean inflation is likely to continue increasing for consumers as producers pass on their costs.

Baruah is on the Federal Reserve Bank of Chicago’s Detroit Branch Board. The Federal Reserve is expected to increase interest rates to dampen consumer demand.

The Republican, who served as George W. Bush’s acting administrator of the Small Business Administration, says people should understand this is not a political problem to help them make the best decisions.

“It is just not this is supply and demand. Supply is constrained. Demand is off the charts right now. Businesses have taken all the waste out of the system. They did that during 2020 during COVID. And as they pass on costs, they find consumers are paying them,” Baruah said.

While in general most large businesses will likely pass on costs, pricing is an equation with multiple variables.

For example, Cruz Burgers instead is focusing on increasing sales to take advantage of economies of scale and hopefully beat inflationary producer costs.

“If we grow, we can handle it,” Da’Cruz said. “That is the goal.”