 Dear Money & Crisis Reader,
It’s official… inflation is now deeply embedded in the financial system. If you’re not yet seeing rising prices where you buy things, it’s because inflation operates on a slippery slope… You see, inflation arrives in stages. It’s not as though it appears overnight and suddenly the cost of everything rises. Instead, inflation slowly works its way into the financial system in phases. - Phase 1: Raw materials
- Phase 2: Factory gate prices
- Phase 3: Retail prices
The first stage occurs in the manufacturing segment of the economy when producers are suddenly paying more for the raw goods and commodities they use to make finished goods. We first hit this stage several months ago as the chart below illustrates. The price of raw materials such as copper, lumber and even gasoline are all up triple digits in the last 12 months. 
Now, one or two months of higher commodities or raw goods is no big deal, but once you're talking 6 to 8 months of steadily rising prices it's significant. At that point manufacturers are forced to start raising the prices of finished goods, or face shrinking profit margins. This is when you see the next phase of price hikes. Factory Gate Price Increases You see, in today’s economy the company that makes something is rarely the one that sells it to the public. Instead, manufacturers first sell their goods to retailers or distributors, who then sell the goods to the public. The prices that producers charge distributors are called “factory gate prices” (the prices the goods cost as they leave the factory). And according to the Chicago Business Barometer, factory gate prices just hit a 41-year high. Put another way, the last time producers were forced to charge this much was in 1980… and that was during one of the worst inflationary storms in history when the Fed was forced to raise rates to over 15%. | 
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