june2022 - 36

ECONOMI C OUTLOOK
Schools referred to the problems associated with the quarantine and
subsequent reopening of the economy. It had to do both with how and
when the schools were open and the effects of their not being open on the
workforce. Again, we appear to have wrestled this problem to the ground.
While the solutions are still evolving, we no longer have to contend with
the same degree of impairment we had as recently as the end of 2021.
Saloons referred to the effects of the pandemic on the leisure and
entertainment sector of the economy. At the time of the outbreak, the
leisure and entertainment sector was the largest category of total payroll
employment. This sector also took the heaviest hit and has taken the
longest to recover. Indeed, as of April 2022, employment here was still
below where it had been in February 2020, with hiring at hotels and
restaurants still lagging behind their pre-pandemic levels. What has
happened in this sector best embodies the structural changes that have
taken place across the economy, affecting the supply of, the demand for,
and the price of labor.
The last element was supply-and this was the supply chains. Yes,
chains. There is one for goods, which gets all the press because pictures
can be taken of the stacked-up containers, and there is one for labor,
which is harder to show. Both were severely disrupted, and both are still
being restored. And, most importantly, the effects of those disruptions are
driving what is now the principal economic problem we face: inflation.
Inflation is defined as a widespread and long-lasting rise in the level
Photo: 19237114 | Laura Gangi | Dreamstime
Inflation jumps
ahead as top
economic concern
Worries about the effects of the pandemic
on health, education, labor, and the
supply chain have been usurped by a
new threat: out-of-control inflation.
When last we visited in this space, we said that our outlook for the
economy in 2022 and beyond would hinge on the resolution of four
factors, all of which start with the letter " S. " Those were shots, schools,
saloons, and supply.
Shots referred to the public health issues caused by the pandemic.
And, as of the middle of 2022, those issues have largely been addressed
through the vaccination program, the development of herd immunity,
and a better understanding of the disease. While we can't say that the
problem has been solved, we can say that it does not present the same
obstacles we faced a year ago.
of prices. Because prices are the most important signals in a market
economy, it is crucial to understand how and why prices are changing
so as to be able to understand the signal they are sending.
The most widely used measure of inflation is the year-over-year
percent change in the All Items Consumer Price Index (CPI). This statistic,
which goes back to 1914, is compiled and published monthly by the U.S.
Bureau of Labor Statistics. It is based on a basket of goods and services
we all consume and seeks to measure the cost of living. Think of it as the
nation's shopping cart. The number it produces is the aggregate inflation
rate, which, not surprisingly, will not match our individual inflation
rates, because your shopping cart and my shopping cart don't have the
same things in them. But your shopping cart and my shopping cart are
part of the nation's shopping cart.
The rise in the inflation rate from 0.2% in May 2020 to 8.2% in April
2022 was primarily driven by disruptions to the supply chain for goods.
Of special note was the rise in the price of gasoline from $1.87/gallon
the week of April 27, 2020, to $4.43/gallon the week of May 9, 2022.
That rise reflects both the resumption of driving and the movement of
goods following the reopening of the economy together with the rise in
the price of crude oil associated
with the higher demand for fuel.
This process is being repeated
What must
fleets change
to adjust for
the rise of
prices without
sacrificing fleet
efficiency?
By Robert Dieli
ECONOMIST, MACKAY & COMPANY
AND PRESIDENT, RDLB INC.
MacKay & Company specializes in market research for commercial trucking, construction
equipment, and agricultural machinery. The company provides strategic research
and analysis to vehicle and component manufacturers, distribution and service channels,
industry associations, and private equity firms. With a long career managing portfolios
and coordinating domestic economic forecasting programs, Dieli began RDLB,
Inc. in 2001. In this role, Dieli serves as an advisor to many firms in the trucking, consulting,
and financial services sectors. He is also an economist with MacKay & Company.
across the economy, with higher
demand meeting constrained
supply. The result is higher prices.
The question now is how much
longer will this dynamic persist?
The answer will be determined
by how quickly we remove the
remaining supply constraints,
and by how much demand is curtailed
by both the higher prices
themselves and the actions of
the Federal Reserve to slow aggregate
economic activity. We expect
some unpleasantness to ensue.
For businesses buffeted by the cross currents of inflation, the first
priority is to secure the supply chains. For labor, this requires taking
steps to retain and, if possible, recruit the people needed to generate the
revenues that will sustain the business. For materials and equipment,
this requires special attention to the price and availability of the items
needed to generate the revenues that will sustain the business.
Weathering the inflation storm requires active responses to the price
signals coming from all the markets you are a part of. The main question
for fleets is what should be changed to adjust for these higher prices
without compromising fleet efficiency?
36 Fleet Maintenance | June 2022

june2022

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