A 3.3% price increase between July and August 2001 swamped buyers of industrial pumps. An even higher 5.6% price wave threatened budgets of those who buy pumps for domestic water systems. These price jumps were exceptionally strong and are not supported by underlying industry cost data, say the analysts at Thinking Cap Solutions. That means the negotiation opportunity noted in this column 15 months ago has become even bigger.

Average pump prices rose 3.3% between August 2000 and August 2001, according to surveys by the Bureau of Labor Statistics. Meanwhile, direct costs for making pumps actually dropped three tenths of a percent. This disparity means the average pumps manufacturer enjoyed a margin gain of $1.68 per $100 worth of product sold. Also, direct labor costs in the industry increased only 1.8% in the 12 months ending August. That's a significant slowdown in labor costs, which had been growing at a 4.4% rate 12 months earlier. Only two arguments remain for higher pump prices: Both in- and outbound transportation costs rose sharply in the past 12 months, and, more important, heat and power costs exploded over the same period, gaining 18.9%. However, electricity and fuel account for less than 1.7% of total pump manufacturing costs. And markets that buy pumps saw their growth decline 3.3% in the year ending August 2001.