Inflation has been unusually low since the recession.
This is a big deal for Waste Management, a national garbage hauler, because it pegs a significant portion of its pricing to the consumer price index (CPI). One analyst estimates around 40% of revenue is made from accounts tied to CPI.
Waste Management CEO David Steiner obviously keeps a close eye on this, and his insight into inflation is something economists may find valuable.
“In 2016, we don’t expect to have a benefit from [consumer price index], in fact we’d expect to have a little bit of a detriment to pricing from CPI in 2016,” said Steiner in a quarterly conference call Tuesday.
“When we look at our CPI business, we always look at it and say, look, there is nothing we can do about CPI, because it’s a government-posted stat that we cannot control,” said Steiner. “So, sometimes we’re going to get hurt, sometimes we’re going to get helped by it. It seems over the last few years, all’s we’ve done is get hurt by it.”
CPI includes a relatively high weighting on shelter and volatile items such as food prices.
Steiner called the US a “zero-inflation economy” and said that every player in the waste industry has a significant amount of business pegged to inflation. In other words, the whole industry has been hurting.