Less than 20% of companies expect cost increases to decrease next year

According to a survey of American CFOs, the majority of American businesses are raising prices quickly to offset rising inflation and a shortage of workers.

The CFO Survey is a joint effort of Duke University’s Fuqua School of Business, the Federal Reserve Banks of Richmond, and Atlanta. It shows that finance chiefs are becoming more concerned about labor availability, inflationary pressures, and disruptions to supply chains.

Nearly 90% of firms reported higher-than-normal cost increases. This is a stark increase from six months ago when only 80% reported an increase in the price of certain goods.

Fewer than 20% expect cost increases to stop in the next six months. Most firms also anticipate that cost increases will continue for at least 10 more months.

Brent Meyer, Atlanta Fed economist, stated in a statement that “CFOs indicate these cost pressures do not abate and will likely remain with us for some time.” “Many large firms are passing on at most some of these costs increases, particularly those that are larger.”

Two strategies were reported by firms to deal with rising costs. The first is that the overwhelming majority (around 80%) of companies experiencing cost pressures are passing some of the increased prices on to their customers. Firms also stated that they are taking on the rising costs by cutting margins, reducing expenses in other areas and eliminating or substituting product options, as well as adding contingency clauses to contracts and declining work.

However, despite the challenges in production, the majority of respondents to the CFO survey predicted that they would see both revenue and employment growth in 2021 or 2022.

As the economy recovers after last year’s severe, but brief, recession, inflation has increased. Jerome Powell is the chairman of the U.S. Central Bank. He has attributed the rise in consumer prices to pandemics-induced disruptions of the supply chain, a lack of workers which have pushed wages higher, and a surge in stimulus cash-starved consumers.

However, he has changed his stance over the past few days. He told lawmakers Wednesday that higher inflation risks have “moved up” and that the Fed is looking at ways to accelerate the reduction of its monthly bond purchases to fight rising consumer prices.

Powell testified before Congress, saying, “At the moment, the economy is very robust and inflationary pressures remain high.” “It seems appropriate to me that we wrap up the taper on our asset purchases, which was announced at our November meeting. Perhaps a few months earlier.”