When inflation is not equal for all
25 September 2019
- The chart here, courtesy of Mark Perry, professor at the University of Michigan and author of the CarpeDiem Blog, has been largely referenced to.
- There are various ways to explain the big differences among the selected sectors in terms of price inflation, but it all boils down to the sources (or lack) of pricing power.
- Government involvement, level of international competition, tradability of goods vs. services.
- From an investment perspective, pricing power is desirable but not necessary.
- Volume growth can offset price erosion.
- Lower prices may stimulate volume growth (e.g., adoption of new technology accelerates as it becomes more affordable).
- Bottom line: sectors with little or no volume growth and weak pricing power are the most vulnerable.
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Source:
http://www.aei.org/
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