Richard Gottlieb

Inflation: Is the Worst Over for the Toy Industry?
July 21, 2008

Many of us expected inflation to be a challenge to the U.S. and global economy when we saw it roar to life in China last year. It only made sense that with the Chinese making the preponderance of the world’s consumer goods, it would eventually play a role all over the world.

Well, inflation is here in full force. Numerous news outlets reported this week that U.S. inflation hit 1.1% in June for an annual rate of 13.2%; the highest in 17 years. To see how it shows up in the toy industry, we just have to look at the latest news on Mattel. Buried among the news of Mattel’s win in the Bratz case and its rising stock price were these sentences in a Reuters article entitled “Mattel second-quarter profit tops view; shares up”: “Mattel raised prices by mid- to high-single-digit rates across most products beginning in June.   The company still expects to face rising input costs, much like rival Hasbro Inc), which has also cited higher expenses, specifically for transportation, as oil prices hit record levels.”

But it is the end in sight? There may just be some faint glimmerings of hope. Oil prices slid this week but even of more interest to those of us in Toy Nation was that Chinese inflation tapered off a little. 

Several news outlets reported this week that “…Chinese consumer price inflation declined from 7.7% in May to 7.1% last month, whereas the economy grew 10.1% in the second quarter, down from 10.6% in the first – the fourth successive quarter in which growth slowed and the lowest rate since the last quarter of 2005.” 

If Chinese inflation is any indicator of what can be expected down the road than maybe, just maybe, inflation may cool off a little. Let’s hope so.

Posted by Richard Gottlieb on July 21, 2008 | Comments (0)