Inflation is Back…LIFO is Good

While most people cringe at the thought of inflation, companies using the LIFO method of inventory valuation will be pleased to know that inflation is back. We’re finally starting to see good levels of inflation in many industries. For example:

• In the last year, Petroleum, lubricating oils, and greases, along with kerosene, jet fuels, and gasoline have experienced significant amounts of inflation.

• Copper, nickel ores and nonferrous metal ores are experiencing 31%-41% inflation so far in 2011.

Other industries experiencing inflation are:
• Recyclable Materials – Inflation was very high in 2010, and is still at 20% – 30% in 2011
• Animal and Pet Food manufacturing – Dog and cat food, along with other animal feeds are on the rise and currently at about 12% inflation.
• Yarn, thread, and fabrics – These have been consistently rising since early 2010, and inflation in 2011 is currently showing as much as 13% inflation.
• Grocery Items — Grocery items have been consistently on the rise for the last year and are currently experiencing 15% plus inflation.
• Paint and painting supplies and Wallpaper – Inflation has been on the rise and is about 7%.
• Cigarettes – Inflation averaged 6% in 2010, and is showing 8% in 2011.

While the word inflation generally has a bad connotation, in today’s economy inflation is a positive sign of growth. I’ll be making additional posts in the coming weeks outlining specific case studies of how inflation benefits many companies.