December 10, 2024

Covid – US companies face long-term inflation after hours

3 min read
Covid - US companies face long-term inflation after hours
USA, Trade
But with prices doubling and no sign of peaking, the pace is starting to change behavior (Image: Reuters / Lucy Nicholson)

As businesses and consumers United States To face Swelling For more than four decades, some companies are already betting that this cost increase will last longer than many economists have predicted.

At HCC, a manufacturer of farm equipment components, Chairman Brian Nelson expects two to three years of high costs.

The CompanyIllinois is based in Mentota and is a supplier to businesses such as Deere, which expects a double-digit increase in its payroll this year.

This is still a new area for companies, including the HCC, which has been operating in the US economy for decades, where inflation is rarely below the 2% target. Federal Reserve.

But prices have more than doubled and, with no sign of peaking, the pace is starting to change behavior.

Inflation cycle

“Inflation is stagnant,” said Diane Swong, chief economist at Grant Thornton Consulting. “We have had low inflation for a long time because it creates low inflation. And high inflation causes high inflation.”

Part of this dynamic can be seen in the price inflation of goods that spreads to certain services.

Anna Wong, a leading U.S. economist at Bloomberg Economics, points out that the rise in car prices, which was the main driving force behind inflation last year, has pushed up the cost of auto insurance. The same dynamics apply to home and health insurance.

American consumption
Part of this dynamic can be seen in the pricing of products that are spread over certain services (Image: REUTERS / Mario Anzuoni)

“Thus an unstable shock can lead to more continuous shocks,” he says.

Wage increases are the main type that have indirect effects.

Batesville Tool & Die, based in Indiana, raised its entry-level pay from $ 10 an hour to $ 15 an hour last year due to labor shortages, prompting a broader overhaul of the workforce, raising the overall bill from 20% to 25%. Jody Fledderman, CEO of the company.

Strike outside the John Deere campus in McDonough, Georgia on November 5, 2021.

And the value is still rising. The hourly wage is now close to $ 17.50, and Flederman worries that the 3% wage increase forecast for 2022 may already seem too low.

According to Jason Furman, who heads the Obama administration’s Council of Economic Advisers, consumer prices will be higher than the central bank’s 2% comfort zone by 2024 if inflation does not ease and enter the US recession. At Harvard University.

“For the first time in decades, it is certainly possible that inflation will be an issue in the 2024 presidential election campaign,” Furman said. He predicts that consumer prices, which were 7.5% in January, will rise to 4% to 4.5% later this year.

Business expectations for inflation rose significantly to 3.6% in February, according to a Fed survey released in Atlanta this month. Approximately 40% of surveyed companies expect significant upward pressure on labor and other costs.

United States
Salary is a major category in which the increase has knock-on effects (Image: Reuters / Mike Blake)

For some companies, persistently high inflation has its advantages.

Axel Hefer, CEO of global travel platform Trivaco NV, says higher prices mean more business for a comparison site like his. “We expect passengers to be more cost-conscious, so the relevance of the price comparison will also increase.”

John Furner, CEO of Walmart, a retailer, says higher price crises are attracting consumers to the company’s stores. “Middle-income families, low-middle-income families and even wealthy families are becoming more price sensitive, which is an advantage for us.”

Leave a Reply

Your email address will not be published. Required fields are marked *