From diapers and mattresses to a can of Coke: Why price tags are climbing

As Colin Crump walks through the manufacturing room for his mattress business, there is not a single material he sees that hasn't jumped in price in recent months.

Wood, fabric, foam, and metal all cost much more for him to buy, if he can get his hands on them in the first place.

Of his 50 suppliers, only one or two haven't hiked prices.

"Obviously, people hear about it with the wood products, but across the board, I can't think of one product that hasn't gone up anywhere from five to 10 per cent and some products are up about 50 to 60 per cent," said Crump, president of Sleep Boutique, which makes custom mattresses.

Businesses and manufacturers in many different industries are having a similar experience, which raises concerns about inflation and the overall cost of many products that people buy.

The reasons are complex, but the pandemic plays a role driving both supply and demand.

In the case of mattress foam, for example, when COVID-19 hit last year, Crump says manufacturers cut forecasts for how much would be needed. Meanwhile, demand started to rise, as people stuck at home, spent money there.

Price tags have already increased about 10 per cent at his store over the last six months and could climb further.

"My biggest concern is, how long can I maintain my price point before I have to increase that to my customers and if they do increase, does that potentially price me out of the market?" said Crump.

Sales at his business are up about 10 per cent over the last year, but up until the last few weeks, he wasn't able to increase production without enough of the raw materials.

"With some of our suppliers, it's like pulling teeth to actually get product. In the meantime ... we have more work than we ever had, but we don't have the materials to do it," Crump said.

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Supply woes

The rising expenses have followed a hockey stick-type curve, making it difficult to handle, said Louis Stack, the founder of Fitter International, which makes and sells fitness equipment.

The company put out a new catalogue in recent weeks and already those prices should be adjusted, said Stack, but it's a challenge to keep prices in line as costs are continually climbing.

"I kind of want to wrangle them all together and do a year-end price increase that represents our new reality which will be a significant 20 to 25 per cent price increase in our products," he said.

"I can tell this is going to be the worst thing you've ever seen in the history of our company."

He describes the supply chain in a state of chaos as ships, railways and the transportation industry as a whole struggle to move as much cargo as is required.

At the same time, many factoriesthat reduced production at the outset of the pandemic amid economic uncertainty are now challenged to meet demand because of COVID-19 impacts on their workforce, among other difficulties.

Meanwhile, with restrictions on travel and dining out, consumer spending habits have shifted from those items toproducts used at home.

Events like the Suez Canal blockage and the Texas power outage have only magnified the global supply chain problem.

When materials do arrive, Stack has noticed the quality often isn't as good as it was pre-pandemic. For instance, wood is either too dry, too wet, damaged or not glued properly.

"Costs of products are going to skyrocket everywhere. People are going to need more money to buy them. That's the new inflation that we're going to see and it's a reality that is going to hit all people, everywhere, in my opinion," said Stack.

He expects it will take between 12 and 24 months for the supply chain to return to normal and by then, the higher prices could become the new standard.

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Inflation fears

Inflation has remained close to the Bank of Canada's target of two per cent, although some experts anticipate it could temporarily rise to three per cent in the spring because of rising commodity and energy prices, such as lumber, metals and oil. Food and home prices have increased, while clothing and recreation costs have fallen.

Some large corporations are also hiking prices because of rising expenses,such as soft drinks from Coca-Cola and Procter & Gamble's diapers and feminine-care products.

"This is something, as economists, we really fear," saidAmy Peng, associate professor at Ryerson University'sdepartment of economics in Toronto, about rising inflation.

She expects prices for many products to continue to increase because of supply chain challenges.

"We wish there is a button or a lever so when the economy shuts down, we can just push the button and the economy returns. But the problem is this restart is actually difficult because there's global logistic problems."

Ryan McMillan, president of McCrum's Office Furnishings, said he hasn't experienced any delays in receiving product, mostly because he relies predominantly on Canadian manufacturers.

The main setback he's faced is in procuring new fleet vehicles, a result of increased demand for parcel and other delivery services by many companies during the pandemic.

"We've got two five-tonne trucks on order. They're not going to come until December, they're just that backordered. We couldn't find a transit van for the life of us," said McMillan.

While he has yet to see an increase in expenses for the products he sells, it's likely just a matter of time.

"The price of steel, aluminum, foam, all of it has gone up and of course all of it is part of office furniture," he said. "We know it is going to happen purely because we've just seen the commodities go through the roof."