A customer pushes a shopping cart past paint samples at a Home Depot Inc. store in Louisville, Kentucky.
Luke Sharrett | Bloomberg | Getty Images
Do-it-yourself needs are getting more and more annoying, as missing accessories and higher prices make life more difficult for do-it-yourselfers.
Take color, for example – if you can find it and afford it.
A clash of factors, from an unusual freeze in Texas earlier this year to soaring demand to persistent supply chain problems, has resulted in a paint shortage and price spike.
Customers across the country are finding it more difficult to get the color they want as shopkeepers struggle to keep products on shelves and pay rising costs from their suppliers.
“We have seen several price increases from all of the manufacturers we work with,” said Randy Moser, owner of Buss Paints, a specialty store in Emmaus, Pennsylvania, about 85 km north of Philadelphia in the Lehigh Valley. “It’s been like that for a while now and it doesn’t seem like it will get any better in the next three to six months.”
The Covid-19 pandemic has sparked a wave of new interest in projects around the home. From freshening up the garden to adding swimming pools to applying a coat of paint, retailers have faced tremendous demand for goods on these projects.
That alone stretched supplies and increased costs, but it was more than that.
The deep freezing in the south slowed the production of petroleum, an important component of paint. The shortage of other goods has clogged supply chains, while the demand for Chantilly lace, Tricorn Black and Green Smoke – to name three of the most popular colors – is in abundance.
Sherwin-Williams is the largest paint manufacturer in the United States with annual sales of $ 18.4 billion. In calls for investors, company representatives were open to the fact that they would include additional “price campaigns” in order to cope with the rising input costs.
“These production stoppages, along with rising demand for architecture and industry, have put pressure on the supply of raw materials and driven up prices quickly,” said Julie Young, vice president of global corporate communications at Sherwin-Williams, in a statement to CNBC.
“The pace at which capacity will come back online and offer more robust remains uncertain,” added Young. “We have been very proactive in handling the supply chain disruptions to minimize the impact on our customers.”
However, prices are rising and supply becomes more difficult.
Companies are trying to cope with it
Producer prices for paints and coatings increased 10.6% year-over-year in August, the largest annual increase since January 2009. This was part of a broader increase in the producer price index, which rose 8.3% during the month. the strongest increase in the history of the metric dating back to 2010.
At the same time, the sales figures have increased. Sales in the paint and wallpaper stores rose 7.8% annually to $ 1.34 billion in June. The pace of sales growth has slowed since the all-time high in April, but is still robust.
Moser, who does business out of his Pennsylvania store, is feeling the cost increases in a number of ways as demand persists.
“Of course it influenced us in the sense that you can’t get certain products. So you start selling certain products and then you have to switch to another, ”he said. “Since the pandemic started, so many people have painted and done house construction along with all the other construction work.
Smaller stores have felt the pinch in ways that large retailers don’t.
Robert Muhammad of the 4 Seasons Paint Store in Brooklyn, New York, said that some of the larger companies prefer larger stores and snub smaller retailers with scarce product availability. Mohammed said some of the larger manufacturers are pushing stores to only sell their products or they will be cut off.
“It’s really hard for small businesses,” he said. “What are you going to sell to the people? The people we are looking for now only supply the big stores.”
This could mean trouble for consumers in the coming days. Color could continue to be scarce and expensive for the foreseeable future.
“If you want to work around the house, get in the car and buy paint now,” AkzoNobel’s CEO Thierry Vanlancker told Bloomberg News earlier this week.
In its latest investor update, the Netherlands-based global paint maker said prices will rise significantly in the second half of 2021.
Zoom In Icon Arrows pointing outwards
How long the disruptions will last is controversial among politicians and economists.
The “transitory” inflation debate
The Federal Reserve insists that the current wave of inflation is temporary – “temporary” is the central bank’s preferred term – and is already showing signs of slowing. White House officials privately say they are sensitive to rising prices but are seeing supply chain problems subside as even some key prices like hardware, lumber and building materials fall from their highs.
At the Fed, however, there are some deviants.
Dallas Fed President Robert Kaplan said Thursday that supply and demand imbalances “will last longer than some people expect,” while companies struggling to fill vacancies pay higher wages. Kaplan said he sees “pricing pressure expanding into next year”.
“There’s an upside risk based on what we’re seeing,” he said.
Wall Street economists generally support the transition position, although many now believe that the current situation could actually last through 2022.
Morgan Stanley, for example, expects inflation to rise further in the first half of next year and then turn into deflation in the second half of the year. Current conditions in the coatings industry are “the height of raw material availability / cost inflation issues, but only the early stages of price hit,” said Vincent Andrews, a stock analyst for the company, in a statement to customers this week.
Andrews notes that a number of factors, such as the aftermath of Hurricane Ida and the functioning of global supply chains for the chemical industry, will help determine ongoing color inflation. Shortages of epoxies, acrylics and certain solvents and additives are the main problems right now, he said.
“Companies seem to have the most confidence in the current solid demand environment, which will last until 2022, but like the rest of us, we monitor production levels in relation to the commodity environment,” he said.
In his paint shop in Emmaus, Moser said that customers in his shop are coping with higher prices just as they seem to be coping with inflation everywhere.
“It’s everywhere, in every way, in the grocery stores, everywhere you see it,” he said. “Everyone has the same problems now.”
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign up to start a free trial today.