Bad news on the price of tools. (morphing into OT)

[Dave Lehnert]

I was reading on another WW forum. The president of a popular mail order tool catalog (can you guess?) said for the first time in 25 years they are not having a summer sale because of the increase they are absorbing for now. and next year bad things are going to happen to tool prices.

[Greg Peterson]

Sounds like some bad habits are going to start catching up with us. Not surprising in the least.

[Bruce Elasik]

What "bad" habits are you talking about????

[David G Baker]

I wonder if their sales will drop off in a ratio directly proportioned to their price increase. The higher the price the less we can afford to buy. Sounds like a Catch 22 in the making.

[Ken Fitzgerald]

Oil prices going up. Most of those ships transporting those things burn oil. What do you expect? In the lower price category.....say Griz versus SawStop, there is generally a smaller markup. Thus those who manufacturer that stuff can't afford to take the hit as much as somebody in the higher priced category can.

[Rick Gifford]

Bottom line is everything is going to go up.

Look for it and expect it. Not that it makes us feel good about it. Its discouraging.

[Doug Shepard]

Bottom line is everything is going to go up.
...


I'll remember to show this to my boss with respect to my wages.:D

[Duncan Potter]

I went to a junkyard the other day to get a part for my car. The guy there said that the selling price for crushed cars has doubled in the last 1-2 years. He no longer parts cars out as much as he used to, cause it's easier to crush 'em and cash in.

Everything made of steel is going up fast!

[Lewis Cobb]

Here's a rather bizzarre twist on this that I was reading in a news article the other day -

We all know about the cost of transportation and where it's going. But the Chinese are sucking up natural resources all over the globe to fuel their enconomy and that's pushing prices up on top of the transportation costs (check the price of a reel of copper wire at Home Depot if you have not bought any in the last couple of years).

Now here's the ironic twist - the economies of some items are starting to cause some "re-patiotization" of some of the heavier things - back to North America as a result - comparatively speaking it's starting to make sense for manufacturers to start to bring production on some things - say the heavier stuff more sensitive to shipping costs - back here from Asia. This is not my saying - this is something I read in a newspaper artcile so you "know" it's true :D.

But seriously, the way prices are going and costs to move things like heavy iron and steel, we might be surprised in 10 years from now as to where some tools are made.

I'm not waiting for this to play out though - and seeing where things are going with prices, I literally ordered a cabinet saw, an 8" jointer, a 15" planer and a 14" bandsaw about a month ago - they already all went up by 5-10% since I locked in my order !

Lewis

[Pat Germain]

I've been saying for awhile some parts of manufacturing will come full circle. As economies in Asia continue to boom, their labor becomes more expensive. As Asian governments slowly start enforcing regulations, that adds cost. The price of petroleum may be the final straw in making domestic manufacturing once again practical. The US and Canada still have big advantages here with lots of open space and rich coal reserves. I don't think it will happen tomorrow, but perhaps in several years.

I think the same thing might happen with food production. It will become less practical to ship meat and produce around the world and even across the country. This could bring back small farms and ranches. Poor countries will be able to grow their own food because farmers will be able to make money on their crop without tons of cheap foreign food pouring in. Maybe, just maybe, they'll stop growing coca, poppies and cannabas for the drug trade and switch to growing food.

It's a bummer to pay more for tools. In the grand scheme of things, it may be one negative among many positives. As we know, in a global economy, everything is inter-related.

[Ben Cadotte]

Here's a rather bizzarre twist on this that I was reading in a news article the other day -

We all know about the cost of transportation and where it's going. But the Chinese are sucking up natural resources all over the globe to fuel their enconomy and that's pushing prices up on top of the transportation costs (check the price of a reel of copper wire at Home Depot if you have not bought any in the last couple of years).

Now here's the ironic twist - the economies of some items are starting to cause some "re-patiotization" of some of the heavier things - back to North America as a result - comparatively speaking it's starting to make sense for manufacturers to start to bring production on some things - say the heavier stuff more sensitive to shipping costs - back here from Asia. This is not my saying - this is something I read in a newspaper artcile so you "know" it's true :D.

But seriously, the way prices are going and costs to move things like heavy iron and steel, we might be surprised in 10 years from now as to where some tools are made.

I'm not waiting for this to play out though - and seeing where things are going with prices, I literally ordered a cabinet saw, an 8" jointer, a 15" planer and a 14" bandsaw about a month ago - they already all went up by 5-10% since I locked in my order !

Lewis

Thats the thing with moving the manufacturing over to asia. Companies did this to save even just 1% to increase their bottom lines. Now its to the point your going to have to pay a premium for asian made products. My only fear is they are going to keep production over there and just keep raising prices. So in the near future, we may have to pay premium pricing for medium or low quality asian made goods, vs. paying a premium for good US made goods.

[Brian Weick]

a shock to me, everything is going up , just heard on the FOX news that gas could hit $8.00 a gallon if an environmental bill goes through to cut down on the emissions~ $8.00:eek: I think it's time to get my rickshaw out and start getting some exercises while going to work~.
You have to try and keep a positive outlook on things, realistically, what can we do about it, complaining isn't going to help, but we can cut back on our daily spending habits and be a little bit more conservative. Things will calm down and the economy will rebound , something has to happen and it will, it just may take some time and there will be some relief and a rebound here~ just have to get through this. Home sales are up,(slightly) which is good, the housing market is still a little soft but it is showing some improvement.
Everyone ,including the banking industry are starting to tighten there belts~ loans are very difficult to get because of the economical conditions and the value of the dollar hasn't helped either~ it seams that most things are related in a domino effect because of a lot of factors. I believe once things improve and there is some positive numbers coming back on the countries financial condition ~ I believe things will get better ~ we are all basically affected by this one way or another but together we have to get through this.
Brian

[Ben Rafael]

Rickshaw? Heck with that, I'm getting a horse.

[Steven Hardy]

"and next year bad things are going to happen to tool prices."
and maybe next year bad things will happen to Tool sales...especially imports.
Who knows.....maybe next year OIL will not be subsidized by their government (CHina) any longer ?

Over the next couple years ,I suspect we will see more than one
bubble economy pop.Not long ago we saw the dot.com industry pop. We have just seen another one pop (mortgage's) .Now the speculation has moved to commodities (oil,gas,steel,grain) .

I too am perplexed by the statement:
"Sounds like some bad habits are going to start catching up with us. Not surprising in the least."
What bad habits have YOU been doing ?

[Lewis Cobb]

Thats the thing with moving the manufacturing over to asia. Companies did this to save even just 1% to increase their bottom lines. Now its to the point your going to have to pay a premium for asian made products. My only fear is they are going to keep production over there and just keep raising prices. So in the near future, we may have to pay premium pricing for medium or low quality asian made goods, vs. paying a premium for good US made goods.

I think you are correct - at least in the near term. In fact, it's happening already. I can see some hefty increases coming on the cost of tools over the next few years.

As an aside - I saw a pic of your shop Ben in another thread - great space! Looks like some post and beam type building, adding to the charm and character of a wood shop.

Cheers,
Lewis

[Lewis Cobb]

Rickshaw? Heck with that, I'm getting a horse.

And let's not forget the free "road apples" that you will be able to use for your home grown vegetables in the back yard where the pool, hot-tub and manicured lawn used to be......

[Peter Quinn]

Rickshaw? Heck with that, I'm getting a horse.

Forget the horse Ben. They actually consume considerable fuel in a MPG situation, and they have very high carbon emmisions (uh, methane!) to boot. Plus its hard to get in the comuter lane on the high way!:D I like the rickshaw idea.

If I remember correctly from my economics training, in the long run we can expect price parity in a free international economy. Of course in the long run, we are all dead as well. Think that's why I left that field to begin with.

[Brian Weick]

Methane~:rolleyes: Peter, you may have something here, feed the horse beans,hook up some type of sensor to detect methane , and then some Frankenstein type of contraption to go you know where to capture,,,,, I don't even want to get into details, ,,,,ah, on second thought, lets not~ it's to bazaar~:eek:
B

[Steve Schoene]

I strongly doubt that those price increases are really coming soon. The woodworking tool industry is in a sharp slow down. Black and Decker's consumer power tools and accessories, sales were down 26% in the first quarter of 2008 compared to the same period in 2007, though a good part of that is an artifact of moving out of power washers, and some other effects. (Black & Decker makes Delta, DeWalt, and Porter Cable, among other brands.) Industrial tools were also down in a double digit range.

Since demand for woodworking tools is highly discretionary, the decrease in quantities demanded will be relatively large compared to a price increase. It is likely, that even for the industry as a whole, that revenue would decline if prices increase, Of course, if all firms in the industry move together, quantity sold will decline much less than would happen to one firm if it raised prices unilaterally. Since the manufacturers won't get together to discuss price increases privately, they may well want to talk about prices publically, in order to gauge whether all will play follow-the-leader.

But, until stronger growth in personal income, that is being sapped by price increases in "necessities" like food and fuel, I think prices will remain relatively stagnant for woodworking tools. I would not want to be a poorly capitalized manufacturer right now. Eventually, when the economy strengthens, price increases would be more possible for the survivors.

As far as shifts overseas, and "re-patriazation", there was a story in this mornings Washington Post pointing out that an IKEA furniture factory has just opened in Danville VA. IKEA!

[Greg Peterson]

What "bad" habits are you talking about????

Short sightedness. Not looking past the next quarters figures. Not investing for the long term. Looking to make or save a quick buck. Instant gratification. Greed. Shall I continue?

When manufacturing was moved off shore, no one on Wall Street complained, and our 401K's did great. Now, our habit of seeking short term returns is coming home to roost.

Pay a little now or a lot latter. Obviously we choose to pay a lot later. The bill is now coming due.

[Ken Fitzgerald]

Short sightedness and tunnel vision.

When you get too specialized....to focused.....too tunnel visioned....too greedy.....you don't see the big overall picture and that is true for administrators, employees and investors. And businesses, employees and investors can suffer in the long term.

[Curt Harms]

<snip>

As far as shifts overseas, and "re-patriazation", there was a story in this mornings Washington Post pointing out that an IKEA furniture factory has just opened in Danville VA. IKEA!

I sorta figured that was one of the hoped-for consequences of the weak dollar policy. I wonder if letting manufacturing decline was intentional policy--make older facilities obsolete and turn 'em into museums(Bethlehem Steel works for example) and build new & modern. Germany & Japan's industries did rather well after being totally rebuilt in the 1940's and 1950's. I wonder if some decided to do something similar in the U.S. without being bombed most of the way back to the stone age first.

[Bruce Benjamin]

Short sightedness. Not looking past the next quarters figures. Not investing for the long term. Looking to make or save a quick buck. Instant gratification. Greed. Shall I continue?

When manufacturing was moved off shore, no one on Wall Street complained, and our 401K's did great. Now, our habit of seeking short term returns is coming home to roost.

Pay a little now or a lot latter. Obviously we choose to pay a lot later. The bill is now coming due.


LOL!!! I suspect your next step is to stand on the corner carrying a sign that says, "Repent! The end is near, Sinners!!!" It's funny how these types of threads bring out the, 'I told your so...", "I would've done things differently...", and the doom and gloom replies. :rolleyes::D We'll be fine. Economy goes up...Economy goes down. It goes in cycles and we'll pull out of this one.

Bruce

[Ken Fitzgerald]

Bruce,

I agree that we'll be fine but there's no denying that ignoring long term decisions only delays and sometimes worsens the long results.

[Lee DeRaud]

I strongly doubt that those price increases are really coming soon.Really? I think they're already here.

Random data point: Woodcraft is asking $359 for a Jet Mini lathe, $424 for variable-speed...two years ago it was $259 and $349 respectively. (Yes, it's the "improved" model, but does anyone think adding an indexing jig should bump the price $100?) The Rikon mini is up to $329: it was $249 when it first came out in late 2005.

[Greg Peterson]

Bruce, we are certainly not past a point of no return. However, unless we make some serious adjustments to our spending/savings habits and adapt more reasonable long terms expectations, we may be in for a very rude awakening.

America is the largest economy. But our economic inertia alone does not guarantee a perpetual dominance in the international market place.

[Peter Quadarella]

Our ~4% inflation doesn't really compare to truly bad years, like the double digits of the 70s. I'm sure people really thought the end was nigh back then.

Not that things are all rosy, but we must try to keep perspective. Sometimes this stuff can be self-fulfilling.

[david scheidt]

I strongly doubt that those price increases are really coming soon. The woodworking tool industry is in a sharp slow down. Black and Decker's consumer power tools and accessories, sales were down 26% in the first quarter of 2008 compared to the same period in 2007, though a good part of that is an artifact of moving out of power washers, and some other effects. (Black & Decker makes Delta, DeWalt, and Porter Cable, among other brands.) Industrial tools were also down in a double digit range.



Nobody is going to sell tools (or anything else, for that matter) for less than the marginal cost of making them. Since the cost of cast iron, steel, copper, and transport are way up, that will be reflected in the cost of tools. Sometimes you lose less money by not selling anything than you do by selling more.

[Bruce Benjamin]

Our ~4% inflation doesn't really compare to truly bad years, like the double digits of the 70s. I'm sure people really thought the end was nigh back then.

Not that things are all rosy, but we must try to keep perspective. Sometimes this stuff can be self-fulfilling.

Yes, well said, Peter. And this is the point I was making. It's been bad before, it got better, it's bad now, it'll get better, it will get bad again, etc... I'm certainly no financial expert but acting like the business practices of today are so different than those of years past probably isn't really all that accurate. I just think the armchair financial adviser attitude, standing there shaking your head and shaking fingers at big business is just laughable. So YOU know better? YOU would've done things differently? Uh huh...Business gets better and then it gets worse again. It always has and always will no matter how cautious we are. Bad decisions are always going to be made. Oversimplifying things by saying we should've been less short sighted and planned more for the future just sounds to me like blah, blah, blah.

Everyone has some sort of opinion on this I suppose and we're free to express it. But I just think it's really funny how some people take something as incredibly complex and difficult to predict as the world economy and say that they would've done it differently and better. Really? Just how successful is YOUR Fortune 500 company? :D Mine isn't doing so well but that's because I invested all of the profits into the Pet Rock industry. I swear to you I will NEVER AGAIN take my financial advice from an internet forum.:(

Bruce

[Tim Marks]

Our ~4% inflation doesn't really compare to truly bad years, like the double digits of the 70s.

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

Housing has tripled in price in most areas in the last 8 years, and gasoline is 3x higher. Energy costs (fuel oil, natural gas, electricity) for home heating has at least tripled in the same time period. Food price are probably up 20% (and will rise higher when gas prices start feeding back into the prices). Those things represent a large portion of most peoples spending, so I think that the average rate of inflation as felt by my wallet is probably in the double digits.

[Peter Quadarella]

I'll agree that it feels worse than 4%, but I think some of that you mention depends greatly on location. For example, my utility bills have decreased due to the use of CF bulbs everywhere and I use electricity for heating; the rising gas and oil prices did not affect me in that way in my location.

My housing is perhaps 50% more expensive than it was that long ago. Some people in my neighborhood will claim that is nuts, but that is because everyone around here seems to insist on a brand new house, and no one realizes that the 30 year old ones are a great bargain. And housing costs are going down right now ;).

Food prices are more expensive when I go to the local super jazzy grocery store that does everything but wipe my butt for me, but when I go to Costco or the local stand prices are actually cheaper than they used to be, since those choices were not available to me back then.

Yes, gasoline prices have gone nuts. But nearly everything else is cheaper it seems. Cars are less expensive if you adjust for inflation, electronics are just cheaper period. Computers, televisions, and yes, power woodworking tools are better and cheaper.

Now, if you drive a lot, and just had to buy that brand new house in the last 5 years, and have little disposable income, so most of it goes to food, which you only buy at the most convenient grocery store, yes it's going to seem a lot worse than the Fed claims. And yes, I realize this scenario describes many Americans.

[Stephen Edwards]

I sorta figured that was one of the hoped-for consequences of the weak dollar policy. I wonder if letting manufacturing decline was intentional policy--make older facilities obsolete and turn 'em into museums(Bethlehem Steel works for example) and build new & modern. Germany & Japan's industries did rather well after being totally rebuilt in the 1940's and 1950's. I wonder if some decided to do something similar in the U.S. without being bombed most of the way back to the stone age first.


Actually, the US Steel Industry is in the in the midst of a strong comeback. I read an article this week about it in the Washington Post:

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/27/AR2008052703099.html

The story quotes in part "Buoyed by sharply reduced employee costs, soaring global demand, dramatic consolidation that has tamped down cutthroat competition and a weakened dollar that has made imports less attractive, steel prices have tripled in the past five years. For the first time in decades, companies operating in the United States have added capacity and workers."

It's a good article that explains what's going on in the steel industry in America. Personally, I don't see tool prices going in any direction but North!

[David DeCristoforo]

If it takes energy to produce, it's going to "go up". Sorry boys but that's the way it is. The "silver lining" of this cloud is a long way out but it's there (assuming that we manage to escape the apocalypse in the mean time). It will take a while but the only rational route is to return to making things more "locally" and less "globally". It's gonna take some time and sacrifice because we need to do a lot of long overdue work on stuff like alternate energy sources and rebuilding manufacturing facilities that we have dismantled and sold to China in the form of scrap steel, copper and iron. And we need to pay a lot more attention to how what we do effects the environment. But I think we can rise to the occasion. Well OK, it's also going to take a "small attitude adjustment". What we need is the same kind of "can do" attitude that put a man on the moon. Now if only we had the foresight to have put those resources into "alternative energy"!

I was watching an ad on TV paid for by some big energy company saying how we had enough energy reserves in "clean coal" to power so many millions of homes and cars for sixty years and I found myself thinking "Great"! Sixty years. No problem. That's way off in the future right? So why worry?". GIMMIE A BREAK!!! That's exactly the kind of shortsightedness that got us into this mess in the first place. Our first big wake up call came in the early 70's and that's already almost forty years ago. And we still ain't done squat about it.

Ooo, am I ranting? Heh, heh... sorry.....

[Ken Fitzgerald]

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

Housing has tripled in price in most areas in the last 8 years, and gasoline is 3x higher. Energy costs (fuel oil, natural gas, electricity) for home heating has at least tripled in the same time period. Food price are probably up 20% (and will rise higher when gas prices start feeding back into the prices). Those things represent a large portion of most peoples spending, so I think that the average rate of inflation as felt by my wallet is probably in the double digits.

Neither housing or natural gas or electricity have tripled in my area in the last 8 years. Food prices up?...Yup...energy, fertilizers and seed are all up so food prices are going up.

We'll recover but it's going to take time and a little suffering in the process.

[Bruce Benjamin]

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

Housing has tripled in price in most areas in the last 8 years, and gasoline is 3x higher. Energy costs (fuel oil, natural gas, electricity) for home heating has at least tripled in the same time period. Food price are probably up 20% (and will rise higher when gas prices start feeding back into the prices). Those things represent a large portion of most peoples spending, so I think that the average rate of inflation as felt by my wallet is probably in the double digits.

I'm not sure where you live or where you get your figures but here in Northern California nothing has tripled in price as you state. Not even close. We have regular gas from around $4.15 to $4.60 a gallon but 8 years ago gas was about half that price.

I doubt that housing prices are 3x higher now than 8 years ago anywhere in the U.S. My house is about 50% higher now, not 300% higher. 16 years ago I lived in a 2 bedroom apartment and paid $650 a month. A friend of mine now rents the exact same apartment and pays $850 a month and these apartments are considered to be overpriced compared to similar apts. right next door going for about $750 a month. Are you seriously saying that there are places in the U.S. where apts. that were $650 a month in 2000 are now renting for almost $2000 a month? I doubt that.

Food prices are up around here but I don't know that they're up 20%. They might be but absolutely not 300% higher. Go to any restaurant and look at the menu prices. They aren't anywhere near 3x the price they were 8 years ago.

I don't remember what my natural gas bill was then but my electrical bill is about the same. A cord of firewood is a little higher than it was 8 years ago. A cord of oak is around $250 delivered and stacked and back then I think the same thing was a little under $200.

Again, I don't know where you got your info but I don't think it's anywhere near being accurate. This sounds like something from Moveon.org.:rolleyes: Somebody on this forum has a signature line that says something to the effect that a man has a right to his own opinions but not his own facts. Your facts are way off.

Bruce

[Peter Quadarella]

I just want to add one other thing, from an optomists standpoint. :) I don't mean to belittle the bad state of things. But - and no offense meant to our European friends out there - that Americans love their independence and big engines too much to sit idly by and buy smaller and smaller cars forever. I have to think that as fuel prices rise, the push for innovations, and the giant carrot at the end of the stick will be too great to ignore. And some day, someone's going to come up with an alternative energy source that works better than gasoline.

OK, it's a while off before that happens, but lack of dependence on oil could be another silver lining someday.

[David DeCristoforo]

"OK, it's a while off before that happens, but lack of dependence on oil could be another silver lining someday."

The "silver linings" are there but it's going to be tough getting to them. We need a fundamental shift from an economy that is based on growth to one based on sustainability. Growth is "logarithmic" in nature and it's only a matter of time before it "tops out". It is not going to be easy to convince the "economic fascists" that while they do need profit, they don't need nearly as much profit as they think they do. That's probably going to be the most difficult aspect. I think the turning point was when we stopped referring to ourselves as "people" and began referring to ourselves as "consumers". We need to become "people" again.

[Pat Germain]

I think the turning point was when we stopped referring to ourselves as "people" and began referring to ourselves as "consumers". We need to become "people" again.

Well said, Dave. It seems people used to be primarily focused on their relationships; friends, family, neighbors, coworkers. Now it seems everyone is focused on themselves; home, boat, cars, vacations, investments. I'd like to see people get back to relationships. A cooler economy may force people to do so.

Shoot, if someone could figure out how actually make health care less expensive, I could buy all European tools!

[Doug Hess]

I took my Woodcraft flyer to Lowes yesterday, and got an extra 10% of the price of my new Bessy Clamps.

This my first post, I love listening to you guys (so to speak)

[Clifford Mescher]

Everyone has some sort of opinion on this I suppose and we're free to express it. But I just think it's really funny how some people take something as incredibly complex and difficult to predict as the world economy and say that they would've done it differently and better. Really? Just how successful is YOUR Fortune 500 company? :D Mine isn't doing so well but that's because I invested all of the profits into the Pet Rock industry. I swear to you I will NEVER AGAIN take my financial advice from an internet forum.:(

Bruce
Mostly a lurker. I just laugh at the "I told you so" crowd.Clifford

[Christopher Pine]

Mostly a lurker. I just laugh at the "I told you so" crowd.Clifford

Very well said ! I like in the movie depicting the appolo 13 events. The part where the nasa folks were prepearing for the worst and the one gentleman said "I believe this will be our finest hour!" I think if we all get out of the stinking thinking mode and the news media just waiting for the next bad thing to happen so they can have a teaser during Everybody Loves Raymond to get you to watch their pitiful news cast. We are America and we are going to overcome a heck of a lot more than Gasoline prices in the future! We have so much to do... so much human suffereing to overcome in this world and we sit here gripeing about our woodowrking machine costing a few bucks more!
All due respect I don't like it anymore than any of you, but it is hardly anything worth losing sleep over!
Peace!

Chris

[Matt Ocel]

I love listening to everybody's version of "The sky is falling" fact is EVERYTHING is cyclicle.

PERIOD!

I have been listening to people, talk radio, TV news, about how bad it is and what to do to save and make it through these hard times.

They are just replaying the same old stuff from the 70's and earll 80's, and I suppose the old timers have heard it more than that.

The way I see how to make it through this is, Be smart, and work hard, these tough times shall pass.

Now excuse my I have to go and buy the Powermatic 31A.

[Dave Lehnert]

And to think all I thought I was doing was pointing out if you are thinking about buying a new tool you may want to do it soon.

[Lee DeRaud]

And to think all I thought I was doing was pointing out if you are thinking about buying a new tool you may want to do it soon.No good deed goes unpunished. :p

[Steve Schoene]

I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

All in all, inflation has remained relatively well in check. It's not accelerating very dramatically at all. Inflation is a rise in average prices. Increases in prices of gasoline may, or may not contribute to inflation. Even if fuel is a component of cost for a great many products, that does not mean that the prices for those products will rise. Sometimes, costs rise, prices remain constant, and profits and/or wages or rents fall in reaction to the input cost increases. Markets don't guarantee that costs of production can be passed on to buyers. Eventually, that must be true, but the adjustment mechanism may well be through the failure of producers or productivity enhancement, etc.

Just a couple of points: The fed has nothing to do with the price indices. The consumer price index and the producer price index are generated by the Bureau of Labor Statistics, an agency of the Labor Department. The fed, or Federal Reserve Board, is an independent agency. The proportiona are determined by rather extensive surveys. It is true that the proportions are averages, and may not reflect the buying habits of any specific person. And, over time buying habits change but the proportions are readjusted only periodically. But, in general this means that the index may overstate the true welfare effects of the price changes as people tend, at least on average, to switch their person spending toward goods which have become bargains, and to economise by spending less on products which have become more expensive. All indices, by their very nature, must have some biases.

If you want more flexible proportions in a price index, some people prefer to use the Implicit Price Deflator for GDP. This has a difference set of index number biases. The Implicit Price Deflator is published by the Bureau of Economic Analysis, and agency of the Commerce Department.

[Brian Weick]

And to think all I thought I was doing was pointing out if you are thinking about buying a new tool you may want to do it soon.



Dave,

Seriously,
~ thanks for your thoughts, you are correct, they are going to go up and I know exactly where your coming from Dave ~ your going to get all kinds of opinions and comments on all kinds of forums ~ just the nature of human interaction through the WWW, so don't take it personally , been there ,done that, and don't worry about it anymore. Nobody here means any harm in what they are trying to say or express, that's for sure, sometimes I am taken the wrong way as well so your not alone, and most the time it is because i did not explain myself properly ~,,,,, oh well~ no ones perfect ~ :)
Brian

[Bruce Benjamin]

[quote=Tim Marks;863743]I don't believe the fed. Their inflation index proportions are wrong, and don't accurately reflect the buying power of the dollar.

All in all, inflation has remained relatively well in check. It's not accelerating very dramatically at all. Inflation is a rise in average prices. Increases in prices of gasoline may, or may not contribute to inflation. Even if fuel is a component of cost for a great many products, that does not mean that the prices for those products will rise. Sometimes, costs rise, prices remain constant, and profits and/or wages or rents fall in reaction to the input cost increases. Markets don't guarantee that costs of production can be passed on to buyers. Eventually, that must be true, but the adjustment mechanism may well be through the failure of producers or productivity enhancement, etc.

Just a couple of points: The fed has nothing to do with the price indices. The consumer price index and the producer price index are generated by the Bureau of Labor Statistics, an agency of the Labor Department. The fed, or Federal Reserve Board, is an independent agency. The proportiona are determined by rather extensive surveys. It is true that the proportions are averages, and may not reflect the buying habits of any specific person. And, over time buying habits change but the proportions are readjusted only periodically. But, in general this means that the index may overstate the true welfare effects of the price changes as people tend, at least on average, to switch their person spending toward goods which have become bargains, and to economise by spending less on products which have become more expensive. All indices, by their very nature, must have some biases.

If you want more flexible proportions in a price index, some people prefer to use the Implicit Price Deflator for GDP. This has a difference set of index number biases. The Implicit Price Deflator is published by the Bureau of Economic Analysis, and agency of the Commerce Department.

My point exactly! Errr...I think...:confused:;):D

Bruce

[Butch Edwards]

..some truley knowlegeable statements were made in this thread...lotsa good points made. all I know is, that Disposable Income per household has diminished greatly over the past 5 years...I say that in regards to what's happening all over,from rising energy costs... higher taxes...lower quarterly returns on investments...the whole 9 yds.
and with less DI, toys will be forgoed. personal debt is also another factor in this, and many are trying to control that,IOW= not whipping out the Card to buy stuff(including WW tools). regardless of where a product is manufactured, the DI has to be there for the item to be bought.
like someone stated earlier, things are going up...yep....faster than the salaries being earned.
example: in Sat. local paper, were the lists of delinquate taxes,both real and personal properties. the average taxe due on RE was about a grand +/- . many where MUCH more...2-3x more. and the list was 6 pages each, front and back. I'm thankful that I'm not one of 'em, but those folks will NOT be buying many "extras" in the near future.. they'd better try to save their property from auction(they have until July 1). I believe things will get better, but it won't be a quick as a recover as in the past, not nearly. it's a whole new ballgame America's economy's playing in now....more international players with growing economies to compete with.that's never been the case as I can remember.....

[Greg Cole]

Our ~4% inflation

Not including fuel, food and other basic necessities. The fabricated number for inflation is all but useless. Used to keep cost of living raises in the toilet.

I deal with all Euro manufacturers at the day job (ok, one Australian company too). In wake of the lenghty slide of the USD into the abyss, we have started either fabricating in the US for some of our suppliers. Their buying power here now is formidable, literally since the inception of the Euro, they are kicking our posterior. Trading all but on par with the AUD & CDN is bad enough, but the Euro is ridic.
I am having 40' containers of "stuff" (stuff= machined steel items for industrial food processing machinery) made here and shipped to Europe and it's still a HUGE benefit to said machine manufacturer. It's at least 25% cheaper for them per container of "stuff". Too bad as a nation in general we have NO ability to manufacture & export.

Greg

[Peter Quadarella]

Re: the 4% inflation comment - several of the posts above addressed this nicely.

Re: the comments about the USD and exporting - I don't follow that argument. The decreasing USD is a huge benefit to us when discussing exports. They make many of our manufactured goods much more attractive due to the relatively lower cost, and therefore we generate more sales. I don't understand where the problem is with more jobs being generated locally, more money coming in from other countries, and more customs fees being generated because of a lowered USD and more exports.

Doing anything in Europe has been more expensive for a while, mostly due to their higher taxes and stricter controls on employers, the USD just helps a little there. I wouldn't worry about Europe much though, look to the east for our real competitors.

[Chris Padilla]

America is the largest economy. But our economic inertia alone does not guarantee a perpetual dominance in the international market place.

Even the (mighty) Roman Empire eventuall collapsed....

Oh, and try BICYCLING!! Wonderful exercise, low emissions, and you'll feel like a kid again! :)

[Chris Padilla]

Our ~4% inflation doesn't really compare to truly bad years, like the double digits of the 70s. I'm sure people really thought the end was nigh back then.

Not that things are all rosy, but we must try to keep perspective. Sometimes this stuff can be self-fulfilling.

Do you really believe it is only 4% inflation? I think it is WAY understated:

http://finance.yahoo.com/tech-ticker/article/23878/Bill-Gross-Lies-Damn-Lies-and-Government-Inflation-Data?tickers=PTTAX,ING,%5ESPX,SPY,TLT (http://finance.yahoo.com/tech-ticker/article/23878/Bill-Gross-Lies-Damn-Lies-and-Government-Inflation-Data?tickers=PTTAX,ING,%5ESPX,SPY,TLT)

[Steve Schoene]

The approx 4% number includes food and fuel. Excluding these items places the inflation rate in the 2.x percent range.

[Peter Quadarella]

I just didn't want to rehash my thoughts, already posted at the top of page 3. I think the inflation numbers are difficult to pin down. Maybe they are not 4%, but where will you find a group of people to agree on which items count towards inflation?

How much disposable income one has is a big impact on how you view inflation currently. As I mentioned, for those who spent all their money on a big house in the last 5 years, and don't have much disposable income, the higher cost of food and gas makes up such a huge percentage of their money that the inflation rate seems higher.

For someone who has a relatively low mortgage rate, and pays for their gas with only a small fraction of their money, they have a lot of disposable income. This money can be spent getting deals at Costco by buying in bulk. Also, a lot of their money will be spent on non-essentials, such as electronics, clothes, furniture, etc. Over the last 10 years, comparable items similar to these have in many cases gone down drastically.

So, I think it depends largely on one's own point of view. As I mentioned, I agree that much of America is in the first category.

That's my take anyway. Steve provided an explanation of the whys around inflation calculation above, which also provides insight.

[Dave Stuve]

Our dollar has been overvalued for decades - we wanted it high because we got cheap goodies from overseas, and other countries wanted a strong dollar so they could outcompete our domestic labor. And Wall Street wanted it strong so they could invest overseas at very attractive prices.

In the 90s I kept expecting the dollar to fall, but the adage was "don't bet against the dollar", because every time currency traders started pushing the dollar down someone in the US gov't would mention they had a 'strong dollar policy' and/or the Bank of Japan (among others) would buy dollars hard and blow the traders out of the water.

I think the Bush administration wanted the dollar to fall to deflate the huge debts that they were racking up - it's a tempting strategy that can slash your debts. But it's a double-edged sword - oil which we're heavily dependent on increases in price when the dollar falls. Honestly I think their plan to deflect that problem was to just ask the Saudis to pump a bunch more to stabilize the price. They used to do that, but the Saudis said no twice recently, probably because of our meddling in their back yard.

Now we've got the double-whammy of overseas goods costing more, and fuel/shipping/overhead going up too. And I was going to buy a band saw and table saw next year. Sigh.

I just don't want to see a repeat of the 80s where cheap junk was put out to keep prices low. Tool quality seems really high right now....

Dave

[Brad Knight]

Well, here’s my take on it. (and I’m going to do my best to avoid any specific politics)

I personally believe in the American people, and the people here at the creek are probably some of the best examples of American people I’ve found. I have seen a never ending attempt by nearly every member that posts here to strive for excellence… and I appreciate that from everyone.

I think that we… as a people… could do so much better if the government, Democrat and Republican alike… would get out of our way. I think that we could compete with anyone in the world as a people, as individuals. I believe that there is a distinctly American spirit that allows people that are represented here (whether your from the United States of America or not, it’s the spirit that counts) that will push us to make things better, smarter, and more affordable, with a combination of capitalism and a moral fairness that will always put Americans in the forefront.

NOW… with that said… the government needs to get out of our way. Starting with this cap-n-trade deal that all three of the remaining presidential candidates support… it will raise the cost of fuel and energy and none of them are denying it. Then factor in the fact that (I believe) we are the only nation in the world that makes it illegal to go after our own natural resources… the only one. Russia is cutting taxes for their oil companies so that they can explore for more resources, while we are threatening to socialize our oil companies and forbidding them from exploring here. John McCain said he’d no more want to drill in ANWAR than he’d drill in the Grand Canyon. I’d drill in my back yard if it meant lower gas prices. (Disclaimer note: I personally work on drilling rigs so I wouldn’t mind seeing more drilling anywhere)

We do have more coal than Saudi has oil. We also have more total oil than Saudi between North Dakota, Colorado, ANWAR, Gulf of Mexico, Atlantic Shelf and Pacific Shelf. China is drilling… right now… 90 miles off of Florida’s coast when we can’t. (and it was George Bush who signed the moratorium blocking the drilling off of Florida)

One thing I read… about energy independence… there is no need to be 100% energy independent. It’s not that complicated and it’s not quite that ‘big’. All we have to do is to become serious about being energy producers. We have to prove that we’re willing to be ‘players’ in the market instead of simply consumers. We can do that. We can do that quickly. As soon as other oil producing nations realize that there will be more competition for their product… prices will drop. All it will take is to show that we’re serious. Which we’re no serious now.

Now, I hope I have avoided the trappings of politics enough. I just think that woodworkers should be free to work wood. Oil producers should produce oil… and I am all for alternative energy sources… but if they’re that great they should produce energy and compete with the other guys. Businesses should run businesses and politicians… well they should stay in Washington and debate and call each other names like they’ve done for hundreds of years and get out of our business.

(Sorry for the long preachy post)

[Chris Padilla]

Oil producers should produce oil… and I am all for alternative energy sources… but if they’re that great they should produce energy and compete with the other guys. Businesses should run businesses and politicians… well they should stay in Washington and debate and call each other names like they’ve done for hundreds of years and get out of our business.

(Sorry for the long preachy post)

I'm hoping $4 gas forces the alternative energy spark...forces Detroit to stop churning out 10 mpg vehicles...forces better energy use...forces us out of our cars a bit....

[Brad Knight]

Chris, I'm all for alternative energy and as an engineer I love some of the new innovative ideas, but should the government be the ones using the 'force' of law to force it??

I personally believe we should have the liberty to choose. I don’t think the government should rule over us as much as they should represent us.

And at the very least, they should be intellectually honest about it and come out and admit that they are working to drive the cost up instead of dragging business men up in front of congress and threatening to socialize the oil companies like they’ve done in Venezuela.

[Mike Henderson]

Now, I hope I have avoided the trappings of politics enough. I just think that woodworkers should be free to work wood. Oil producers should produce oil… and I am all for alternative energy sources… but if they’re that great they should produce energy and compete with the other guys. Businesses should run businesses and politicians… well they should stay in Washington and debate and call each other names like they’ve done for hundreds of years and get out of our business.

(Sorry for the long preachy post)
I'm not a big fan of government intervention but I do see the need for some of it.

Take environmental issues. Companies throughout history have ignored environmental issues, leaving a mess to be cleaned up by someone else. Shouldn't the company making the profit be responsible for the full cost of their enterprise? Why should they be able to take the money and run, while leaving others to live with or clean up their mess?

There's also value in having an unspoiled section of land. Would you really like to see development (such as oil rigs and storage facilities) in the Grand Canyon? Some land is enjoyed by the citizens of the country and they have the right to a say in whether it's going to be changed for the purpose of producing energy.

Finally, a big role of government is to produce a level playing field in the marketplace. Without a set of rules, companies will run small competitors out of business (like Standard Oil did prior to the laws). Once they eliminate the competition, they raise the price. And without competition, the companies themselves stagnate and become uncompetitive.

No, I want a certain amount of government regulation. It makes life better for all of us.

Mike

[Steve Schoene]

Nobody is going to sell tools (or anything else, for that matter) for less than the marginal cost of making them. Since the cost of cast iron, steel, copper, and transport are way up, that will be reflected in the cost of tools. Sometimes you lose less money by not selling anything than you do by selling more.

But remember that changing the schedule of marginal costs (the short term supply curve) only determines the direction of the change of price if at the same time there is no change in the demand for the product.Even though the supply curve (or marginal cost curve) is shifting left with the rise of the input prices you mention, if demand is also shifting left prices need not rise at all. It is strictly an empirical question as to which effect will dominate. But, since some of the more dramatic price increases in food and fuel are also greater necessities so that the income devoted to buying them goes up when the price rises (price inelastic demand). Since woodworking tools are likely both price and income elastic, it's easy for me to imagine demand falling because of the income effects and with price elastic demand as well, I can easily imagine large quantity decreases with only modest price changes.

Sorry, Dave used the term "marginal cost" and I'm afraid I was stimulated to a Pavlovian response.

[Greg Peterson]

... factor in the fact that (I believe) we are the only nation in the world that makes it illegal to go after our own natural resources… the only one. Russia is cutting taxes for their oil companies so that they can explore for more resources, while we are threatening to socialize our oil companies and forbidding them from exploring here. John McCain said he’d no more want to drill in ANWAR than he’d drill in the Grand Canyon. I’d drill in my back yard if it meant lower gas prices. (Disclaimer note: I personally work on drilling rigs so I wouldn’t mind seeing more drilling anywhere)

We do have more coal than Saudi has oil. We also have more total oil than Saudi between North Dakota, Colorado, ANWAR, Gulf of Mexico, Atlantic Shelf and Pacific Shelf. China is drilling… right now… 90 miles off of Florida’s coast when we can’t.

Brad, there is one fatal flaw in the argument that if we could just drill in ANWAR. In a nutshell, ANWAR oil would be sold on the international market.

Senator Ted Stevens from Alaska asked the CBO to do a study about how much ANWAR oil would reduce the cost of gasoline for Americans. Best case scenario would be about .02¢ / gallon.

Even if we started pumping oil out of ANWAR and Florida, the output would not be enough to outpace demand. Besides, the oil companies, just like OPEC, would keep a pretty tight reign on the supply. Demand hasn't curtailed all that much. Much as I hate to say it, until consumers lower their gasoline consumption, why would the oil companies want to lower the cost? People are still buying it like it's going out of style compared to most other countries.


Oil, steel, copper, concrete and so on are hot commodities these days. Demand is high, supply is low.

I expect tools prices will be going up across the board. I'd be surprised if they didn't go up.

[Ken Fitzgerald]

I'm going to caution everyone. Political discussions are not allowed at SMC as per the TOSs. This thread is drifting that way and has already gone WAY OFF TOPIC and is becoming political.

[Lewis Cobb]

Back to the price of tools - :) - I was going to pop this question up in another thread, but figured it fits in here just as well.

Is it just me or did the price of Powermatic's 14" bandsaw just jump about 20 % ?

I placed an order for one before the promotion with the free riser block expired. The price was 899. in the flyer, and amazon had it listed for the same price. I just looked at amazon yesterday and their price for the saw is now 1070.00 :eek: Well, ok, that's technically 19 % but still - seems like the rising prices have already arrived.

If you factor in the free riser block that amazon has listed for 86.70, the difference from the promotion price that just ended to amazon's price today is a whopping 29 % :eek::eek::eek:

Now that's a tad more than inflation don't you think? Maybe I am missing something here...I'd like to think so, but it does not look good from my seat....

[Greg Peterson]

Inflation doesn't apply at the micro level. I suspect there are costs unique to the manufacturing/shipping/distribution channels that are largely responsible for this increase.

[Chris McDowell]

I'm not political but I do have a unique understanding, I believe, of much of the price increases. It's simple, higher fuel costs affect everything. Eighty percent of all town in the USA do not have rail service. Therefore the vast majority of product moved in this country is on trucks.
My family owns a small fleet of trucks and I can tell you a transport of fuel that used to cost $7,200 now costs over $38,000. It costs trucks almost one dollar per mile just for fuel costs alone. So the next time you are at the grocery store , Wal-mart, or Woodcraft, realize nearly everything you see has been transported by a truck somewhere along the way.
A transportation crisis is ongoing in the country. By the end of the year experts predict 10% of commercial trucks that began the year 2008 will be off the road by 2009. It's not reported on the news and not really talked about in the mainstream, but I can promise all of you are paying extra for transportation of every product. And if the number of trucks running continues to fall at this rate, you haven't seen anything yet.

[Greg Peterson]

Among some of my duties, I manage a small delivery fleet of Toyota pickups. We have 23 of these trucks, ranging from 1997 to 2008. The 1997 model has over 500K on the original engine and transmission. Runs like a top, purrs like a kitten and all I've done is tune it up, and change the oil and filters. Great running machines.

I was logging gas receipts this afternoon. Between yesterday and today we have spent over $1,600 in gas. What we now spend in four days equals what we spent in four weeks eight years ago.

I think by the time we really start to feel the pinch, the rising price of tools will be the least of our concerns.

[Bruce Benjamin]

I was logging gas receipts this afternoon. Between yesterday and today we have spent over $1,600 in gas. What we now spend in four days equals what we spent in four weeks eight years ago.


Well that either means that you have much more business than you did 8 years ago, (that's good, right?) or that 8 years ago you were only paying about 60 cents a gallon for gas.

Bruce

[Greg Peterson]

Actually, seven years ago we were paying $1.05 to $1.20 per gallon, depending on location. So, in seven years our fuels costs have more than tripled and are closing in a quadrupling. Other folks likely experienced different costs in their region, then and now.

No matter how one slices it or nitpicks, fuel costs have skyrocketed. Just a matter of time until the rising costs can no longer be absorbed and consumer prices will go up. Unless the bottom drops out of the oil industry. One scenario seems more likely than the other.

Hobbyist make up a respectably large contingency in the wood working tools market. I may be stretching a bit here, but I'm going to suggest that the average hobbyist funds their wood working hobby/habit via discretionary funds. And discretionary funds always seem to be the first thing that gets shrunk when personal finances are subjected to even the slightest stress.

How tool manufacturers respond to rising costs and keep hobbyists buying their tools will be a big challenge.

[Chris Padilla]

Pricing a product to sell it is always a tricky proposition! Too high, no buyers, too low, run out of supply or don't make enough money....

[Rich Konopka]

I'm hoping $4 gas forces the alternative energy spark...forces Detroit to stop churning out 10 mpg vehicles...forces better energy use...forces us out of our cars a bit....

Chris,

It is going to take a while for us to give up or get out of our cars. There is very little mass transit in this country and the country is dependent on cars and commuting long distances to work.

[Joe Chritz]

Sorry, Dave used the term "marginal cost" and I'm afraid I was stimulated to a Pavlovian response.

I have had my share of Pavlovian drool fests but not usually at an economic discussion. :D

Nothing can by itself cause wide spread inflation or economic collapse. Fuel happens to be a constant that everyone needs in some amount or other so it seems to have a large effect then it probably really does.

Only if alternative energy is cheaper, substantially so, will it really have any impact.

Vehicle fuel has so many problems with transitioning from oil to alternative it may be a fair while before any major change is seen. There are some very cool new techs being developed. I just hope they see fruition before I have to turn in my company car and gas card.

Joe

[Steven Hardy]

Some of you guys sound so pessimistic!!!!
Sad!:)
http://www.manufacturing.net/News-US-Tops-In-Global-Competitiveness.aspx

[Greg Peterson]

Rising tides do not raise all boats equally.

The nearby tool shop's business is doing okay, not up, not down. Most of their customers are industrial/utility workers. The shops that sell mainly to construction workers are way down though.

Not all segments of the tool market are off. Perhaps some of the tool manufacturers that are more diversified than say Steel City will have some latitude. Saw Stop and Steel City come to mind as companies that have a pretty limited segment.

[Steve Schoene]

[quote=Brad Knight;865137]
Then factor in the fact that (I believe) we are the only nation in the world that makes it illegal to go after our own natural resources… the only one.

Whoa, Well over half of the world's oil is produced by government controlled, and increasingly government run, oil companies. Governments around the world take a MUCH greater role in determining where and how much oil will be produced than in the US.

... while we are threatening to socialize our oil companies and forbidding them from exploring here.

Sure if you count Maxine Waters as constituting a meaningful threat. Otherwise nationalizing the oil companies in the US is a non-issue with no significant advocacy. This is not Venezuala.

We have to prove that we’re willing to be ‘players’ in the market instead of simply consumers. We can do that. We can do that quickly. As soon as other oil producing nations realize that there will be more competition for their product… prices will drop.

Crude oil is already bought and sold in a world wide market. The contribution of perhaps 2 mm barrels a day additional oil from ANWR would have an impact, but that impact would have to be considered in the context of world production in the order of 85 million barrels a day.