What Fortune 500 Company CEOs Are Saying About Inflation and Rising Prices On Earnings Calls
According to a recent CNN article published on Jan, 13th 2022, inflation has sprung to the top of CEOs’ worry list. In the hierarchy of business threats confronting corporate leaders in 2022, Covid-19 still rules. But inflation has quickly closed the gap. With more than half (55%) of global CEOs fearing that pricing pressures will stay elevated until mid-2023 — or beyond, according to a survey of more than 900 global executives recently released by the Conference Board.
Inflation is now viewed by executives as the No. 2 external threat to business, compared with No. 22 a year ago, the survey found. The top concern remains Covid-19 disruptions. I wrote about inflation and rising costs back in November.
Consumer prices soared by 7% in December from a year earlier, the biggest jump since June 1982, the Bureau of Labor Statistics said recently.
A staggering 95% of manufacturing CEOs polled by The Conference Board say they are facing upward pricing pressure on raw materials, wages and other inputs. They pointed to supply chain turmoil, worker shortages and turbulent energy prices.
Producer prices, those charged by suppliers to businesses, spiked by 9.7% in 2021, the BLS said Thursday. That’s the fastest pace since the government began tracking them in 2010. However, between November and December producer prices ticked up just 0.2%, marking the slowest month-over-month increase since November 2020.
Less than 40% of CEOs indicated their companies are “well prepared” for an “inflation-related crisis,” the Conference Board survey found.
Business leaders plan to deal with inflation by cutting costs and especially by passing it along to consumers in the form of higher prices, the Conference Board said.
Whether inflation is good or bad for a corporation depends on its products and services. If they are essential, people will continue to buy them if they can afford to do so. But consumers will back off of discretionary products and services if their prices increase too much.
Inflation can be a good outcome for people with a long-term fixed mortgage, assuming they get compensation increases at least equal to the rate of inflation. It can also be a good deal for the government since it is able to monetize a portion of the national debt.
Inflation can be devastating for low-income people, as noted, and retirees on relatively fixed incomes. Inflation also hurts small businesses and the lower classes, way more than it hurts most large corporations. One thing that was not mentioned by any CEO (probably to stay away from politics) was the role in government overspending and Fed policy that had a hand in causing the inflation that will become the new normal for a long time.