Deflation and how it is starting to effect the economy.

[Bandit]

Maybe this isn't even deflation but it is what I think of when I think of deflation. I have been in business for over two decades. I run a small wholesale firm in a very small community (about 30,000 population) Over the last couple of decades prices have been fairly stable with an upward trend. Which means as prices rise so do expenses. Rent goes up, wages go up, insurance goes up, well you get the picture, everything has gone up. Now prices are starting to come down but insurance isn't nor is rent, and I doubt I could live with myself if I tried to lower wages. Fuel has come down which is about my only saving grace at the moment. Here is an example, part of my business is delivering school milk. The little half pints of chocolate and 1% ( very large proportion is chocolate , but that's another story). I sell about three thousand a day at $.35 apiece. They cost me eight cents apiece just in freight with a base cost of nineteen cents apiece. As you can see I don't make much on these percentage wise but three thousand a day is one thousand gross and about $250. after freight and COG. Now however the price has dropped to fourteen cents or a nickle a unit. By my contract with the School district I have to pass along any price decreases so now I am selling for thirty cents apiece or $900 a day gross or $225 a day net. I have a delivery driver ($14. per hr), a warehouseman ($16 per hr) and an office person ($14. per hr). My rent is over a hundred dollars a day every day where business is only open five days a week. Insurance/workman's comp is about $75. per day. I sell other things besides school milk so I have some wiggle room but the example was just to show how my small business is now being effected by price reductions. I don't know how much is showing up in the stores yet. I hear about these huge blowout sales in places like Target but not sure about items like milk and butter and cheese. Butter for example has dropped sixty cents a pound in last four months. This is beginning to take an immediate toll on my business as sales figures are based on dollars and not number of units sold..Just wanted to add something a little different to the conversation to give a broader perspective.

[Doremus]

1. Wow, that really sucks. You mentioned that you have to pass along the price decreases.

I'm curious -- does the school pass along the savings to the students? (I bet I know the answer to that one!)

As an aside, those little containers of milk were 3 cents and 5 cents (chocolate) when I was a kid in the '60s.