From burgers to buildings, supply chain problems hit Alaska
Alan Brown recently moved to Juneau from Nashville, Tennessee, and he has a little sticker shock during the McDonald’s drive-thru in Juneau. He orders a McNugget meal and the guy across the speaker tells him his total, and good day.
“So $ 10.17 is my total. At home, it would have cost $ 7 and change, ”says Brown.
Brown is no economist, but he did one thing economists love to do with the McDonald’s menu: he compared the price of the same product in two different markets. The menu is also a convenient way to track inflation in one place over time.
The Economist magazine has his Big Mac index. But for decades, State economists opted for the quarter pound with cheese, sometimes highlighting what it costs in different Alaskan communities in the magazine Alaska Economic Trends. Spoiler alert for the july issue: It’s $ 5.49 in Juneau, up to 10 cents before the pandemic in 2019.
This issue of Trends focuses on spikes in the cost of living and attributes much of that to supply chain issues related to the pandemic. There was deflation last year amid closures, but now the world is reopening.
McDonald’s would not answer questions for this story. But a local hamburger food truck company shared what motivated its first price hikes since opening in 2014. On social networks last month, Pucker Wilson said his procurement costs are more than double since January. As a result, the prices of most of the menu items have increased by $ 1. Pucker Wilson’s cheeseburger is now $ 10.
Restaurants in general operate with low profit margins, they are therefore particularly sensitive to variations in food prices. More, staffing is difficult at the moment, and there are fewer customers with a short cruising season.
“It is by far the most difficult thing we have ever had to face,” said Reecia Wilson, the principal owner of five restaurants in downtown Juneau, including Hangar on the Wharf.
Wilson said market conditions caused her to leave two of her seasonal restaurants closed this summer and raise prices.
“It’s hard to run your day-to-day operations and just get through the day, let alone having to reprint your menus and watch out for inflation as we look at a very different business model,” she said. .
Wilson said prices were on the rise in all areas, especially for meats and seafood. She hopes the supply chain problems will be temporary and she can rebuild her businesses.
Meilani Schijvens, who runs business publishing firm Rain Coast Data in Juneau, summed up her take on what’s going on.
“I think most people – most organizations – miscalculated how quickly people received vaccines and once vaccines were distributed – how quickly normal life would return, and therefore normal demand,” he said. said Schijvens. “And so you just see a lag. And you see it locally, nationally, globally, in terms of bringing supply chains to the level of demands that we currently have. ”
Burgers and menu prices are an indicator of supply chain issues. Schijvens highlighted another price-related indicator, often measured in the millions.
“So we see a lack of building materials. We see that locally with our construction projects, our construction projects have become very expensive, very quickly, ”she said.
The Alaska Department of Transportation and Public Facilities does not a lot of construction, and Christopher Goins is the DOT construction engineer who estimates he will oversee more than $ 140 million in departmental construction contracts in the region this season.
“We’re definitely seeing price fluctuations, lots of price hikes, material shortages in general, across the board,” Goins said.
The way tenders are conducted in public markets, construction companies that work now probably stuck in what they get paid months or even years ago for multi-season projects – before material prices went crazy.
“Yeah, so (for) most of our contracts with the state of Alaska really don’t have what we call ‘escalation clauses’,” he said. “When a dollar amount comes in, it’s pretty much a fixed amount for that Contract.”
Goins said the ministry was prepared to give contractors extra time. But it’s up to them to factor the risk into their bids, which Goins sees for projects in the tender phase now.
When the bids are over budget, there are only a few options: ask policymakers for more money, cut projects to fit on budget, or not build.
“So these are the tough realities of the budgeting process on our side,” Goins said.
It is much the same story with Goins’ counterpart in the city and borough of Juneau.
For the future, Goins has hopes, but no certainty.
“I don’t think we’ve been through this inflationary crisis, if it’s a crisis,” he said. “And hopefully the markets, as the country starts producing again and the world starts producing again, we hope some of those higher peaks start to go down.”
The industrial group Associate General Contractors of America said materials and supply chain issues could cause some companies to go bankrupt and worsen high unemployment rates in the industry.