Manufacturers Struggle With High Costs Of Materials

Many manufacturers have been forced to raise prices and cut back on investment as the costs of raw materials reach heights not seen in years.

BIRMINGHAM, Ala. (AP) -- Many manufacturers have been forced to raise prices and cut back on investment as the costs of raw materials reach heights not seen in years.

The everyday raw materials that most people don't think about -- steel wire, lubricating oil, packaging -- are getting more expensive.

But it's not just that. There are a bevy of factors causing strain, including increased competition from outside the U.S.

"This is one of those rare and unique moments in economic history, like the Great Depression," Bob Allsbrook, chief economist at Regions Financial Corp., told The Birmingham News. "This isn't the Great Depression, but the sheer number of factors aligned against businesses right now is unique in the same way the Depression was."

Oil prices have reached record numbers in recent weeks, surpassing $140 a barrel. That affects the price of many things, from ground-freight rates to plastic packaging.

The price of steel sheet, used in everything from appliances to automobiles, has risen 82 percent since January and has almost doubled since last year.

Cotton prices have risen 12 percent in the past year.

The price of coal, which is used to produce 84 percent of the nation's electricity, has nearly tripled.

Businesses can't handle the rising prices for long before they look for ways to cut costs. Often those options include slashing jobs, decreasing spending on new technology and reducing employee benefits. And most businesses have no choice but to pass along some of the cost increases to the people who buy their products and services.

George Clark, director of Manufacture Alabama, a Montgomery-based trade group, said some have already started to make those tough decisions.

"Companies have started postponing capital improvements and investments," he said. "There is no way around it."

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