In a new article for CommPRO.biz, Inflation: The Great Pandemic Pricing Reset, I note that inflation at 40-year highs is not just about the rising costs of materials, gasoline, wages, or supply chains. We are experiencing a post-pandemic reset of prices, driven both by higher production costs and what companies think consumers or clients are prepared to pay.
The article highlights examples of outsized cost increases that far exceed the overall 8% inflation rate. The post-pandemic economic recovery, fueled by fiscal stimulus, has provided "...the shake to the soda bottle of the U.S. economy that has blown off its lid. Prices are exploding and will do so until they find a new balance. This may happen far more quickly than some imagine.”
Higher costs for products, services, and wages in the economy will lead communicators to look to reset their own prices. This is where inflation expectations get complicated.
“If Fed chair Jay Powell’s original thesis that high inflation will, in fact, be relatively short-term, it will be easy for those increasing prices to get ahead of their skis. Economist Paul Krugman just made the point in The New York Times that inflation was likely to drop faster than most imagine because of the transitory accelerant of the bullwhip effect impacting costs at the end of supply chains.”
The article highlights the potential for misreading the market’s capacity for price increases. With COVID-19 stimulus having been taken away, I argue that consumer and corporate budgets are much more fragile than they may seem. With Putin’s invasion and the Fed raising interest rates, CEO confidence in the economy is dropping.
“Communicators will need to think long and hard - just because you can, doesn’t mean you should. There is a narrow and very difficult line to walk.”
There will be tough choices to make in a shifting economic landscape in which inflation is currently the defining feature.
Read the CommPRO article here.
Simon Erskine Locke is founder & CEO of communications agency and professional search and services platform, CommunicationsMatch™, and a regular contributor to CommPRO.biz. CommunicationsMatch’s technology helps clients search, shortlist and hire agencies and professionals by industry and communications expertise, location, size, diversity and designations. CommunicationsMatch powers PRSA’s Find a Firm search tools, and developed the industry’s first integrated agency search and RFP tools, Agency Select™.