Raising Costs: Dollar's Decline Spurs Rise in Producer Prices Of Industrial Products --- More Demand, Less Capacity In Some Lines Are Cited; Rebuilding Profit Margins --- The Hunt for Cheap Suppliers
After three years of snapping up bargains, the folks who do the buying for U.S. businesses are discovering that they must pay higher prices.</br></br>"The pricing initiative is going to the producer from the purchaser," says Douglas R. Cliggott, a senior economist with Merrill Lynch Economics, a unit of the brokerage concern.</br></br>For two years, balky buyers beat back most attempts to raise prices, but now many of the increases are sticking. The sudden change has affected major industrial products from plastics and paper goods to chemicals and components.</br></br>Eventually, the higher prices will be passed on to consumers. They aren't likely to lead to double-digit inflation any time soon, though. For the most part, the wholesale price increases have been selective and moderate, and they are fragile because of the world-wide surplus of many materials. Still, leading economists agree that consumer prices, paced by higher energy and imported-goods prices, will probably climb 3.3% this year, compared with last year's 1.9% increase, and will probably rise an additional 4.2% in 1988.</br></br>The price upswing reflects several factors. Some industries have added little new capacity in the past three years because of the prolonged price weakness, and mergers and restructurings have resulted in some scrapped capacity. By midyear, for instance, only 28 U.S. plants, or almost half the number a decade ago, will make car tires.