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Monday, April 18, 2011

Worth watching: The elements that could lead (or contribute) to inflation

Today’s lead story in the New York Times considers the possibility—and consequences—of the inflation that could result from China’s rapidly expanding economy.  Click here to read the story. 

Implications:   There are several reasons that inflation could be sparked in the near term, including growth in consumption in China, India and elsewhere… shifting the supply-and-demand balance of the world’s commodities.  And as you’ve heard repeatedly, the price of oil could also greatly impact the cost for goods and services.

Inflation can be defined in many different ways, depending on which economist or pundit you’re listening to.  Rather than try add to that heap, I’ll boil it down to what it means to the consumer:  Paying more money for the same or fewer goods and services.

When (not if) that time comes, consumers will have to decide whether a product or service is still worth the money they will pay.  Those companies who have a well-defined value proposition are less likely to become a casualty of inflation.  But make sure you’re not just defining value in terms of the price a customer puts into the purchase; value must be also defined in terms of what the consumer gets out of a product or service. 

Mike Anderson, for the Elm Street Economics consumer trends blog. A service of The Center for Sales Strategy, Inc.

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