In a sea of decades of high inflation, business leaders and consumers alike grappled with the financial crisis. Labor and supply-chain shortages, along with rising interest rates, are prompting many to fear a recession.
In this environment, amid rising consumer prices, some companies are seeing profits while others are casting a gloomy economic outlook. While some leaders worry about a recession, others are anticipating growth.
“It’s no secret that 2022 brings its challenges,” said Sarah Veitch, a market executive at JPMorgan Chase & Co. in Melville.
According to the latest JP Morgan Chase 2022 Business Leaders Outlook, business leaders across the country are becoming increasingly cautious in their economic outlook. More than 1,500 midsize business leaders participated in the survey, conducted between May 25 and June 10.
In the survey, only 19% of business leaders expressed optimism about the national economy for the coming year. This percentage was the lowest percentage recorded in 12 years of survey data and down from 75% a year earlier
The survey comes at a time of subdued consumer optimism as consumer prices rose 9.1% in June from a year earlier, the biggest annual increase since 1981. Consumer hits – rose at the fastest pace since hitting a record 11.6% in March
Last month’s jump in wholesale inflation was led by energy prices, which rose 54% from a year earlier. But even excluding food and fuel prices, which can rise sharply month-on-month, producer prices in June jumped 8.2% from June 2021. On a month-on-month basis, wholesale inflation rose 1.1% from May to June, also the biggest jump since March.
Last week’s report on wholesale prices came a day after the Labor Department said consumer inflation hit a new four-decade high in June as gasoline, food and rent prices rose, putting more pressure on households and possibly sealing the case for another big interest rate hike. has been by the Federal Reserve.
Still, on Long Island, there are business leaders who are “much more optimistic about their individual companies and their growth potential,” Veitch said. “It’s a testament to their ability to control strategic decision-making.” And many of these businesses are “well-run and nimble” and can therefore adapt to change, Veitch said.
Covid has forced businesses to find new skills and become more innovative in some processes, Vitch said. For example, an owner consolidated delivery routes to eliminate labor shortages. The tweak allows the business to “deliver the same amount of product in a significantly shorter period of time, allowing it to serve more clients,” he said.
Meanwhile, consumers face increased prices for goods and services. Rising prices of raw materials – oil, fuel and agricultural products, among others – are driving up costs, experts say
At the same time, some major corporations are reporting record profits.
Martin Melkonian, a professor of economics at Hofstra University, said “part of the price increase is due to cost increases generated during Covid”, which “disrupted the supply chain and, as a result, products became scarcer”.
Then came the war in Ukraine, which “brought counterintuitive sanctions to hurt the Russians but hurt the U.S. and the world a lot,” given the recent surge in natural gas and oil prices in the U.S. Europe, Melkonian dr.
Now, fertilizer, which is important for food production, is also in short supply, “so food prices are going up,” Melkonian said.
“There’s an element of profiteering on top of that,” he said, referring to the monopolistic type of industry that can drive up prices. And it may continue to be that companies can get away with it, he said.
Meanwhile, gas prices have fallen, primarily due to the suspension of the gas tax, which may be a “temporary phenomenon.” The situation could worsen if the Russians decide to retaliate economically by rejecting gas and oil shipments to the West. It could lead countries to resort to dirty coal mining “to get energy for industry, which is not good for the climate – we’re already seriously behind.”
Still, industry analyst Trilby Lundberg of Lundberg Research recently said the continued decline comes as crude oil prices also fall.
“Assuming oil prices don’t rise from here, motorists could see prices drop another 10-20 cents as lower oil prices make their way to the street level,” Lundberg said in a statement.
Still, the Covid-fueled supply chain shortages, which many thought would be over by now, “still exist,” Melkonian said. And those shortages can force people to pay higher prices.
And yet when it comes to the business outlook, Veitch said companies with a business-to-consumer model where they are “much closer to the consumer” may be “a little more cautious about optimism.” However, the food and beverage sector “does largely well across many types of business cycles,” often because “products are always in demand.”
Business sentiment in the Northeast is similar across the country, according to a recent Markham-Hofstra CEO survey.
Factors affecting their business plans, according to the survey, included economic concerns, rising material/operating costs and talent availability.
“The Northeast was slightly less positive in their outlook, but not enough to say it was different from the overall sample,” Andrew Forman, an associate professor of marketing who conducted field research for the study, said via email. Conducted in mid-June, the survey interviewed 254 mid-market CEOs of companies with revenues ranging from $5 million to $1 billion-plus.
Still, 19.4% in the Northeast had a very positive view of the current business environment, as opposed to 15% of the overall sample share, according to the survey.
And on the rise in gas prices in the Northeast, 55.2% said it increased operational costs. Another 22.4% said the increase made employees reluctant to return to the office. Just over 46% said it had reduced the amount of business travel. Another 37.3% said it slowed down their supply chain. And while 17.9% said that the increase in gas prices has resulted in a decrease in revenue, another 17.9% said that it has not directly affected their business.
Meanwhile, consumer prices in the New York-Newark-Jersey City area rose 1.4% in June, primarily due to higher prices for energy and other non-food items, including new and used motor vehicles and medical services, according to the U.S. Bureau of Labor Statistics.
Food prices rose 0.3% in June. Food away from home prices rose 0.8%. Food prices at home were flat, according to the BLS. Lower prices for fruits and vegetables, as well as for meat, poultry, fish and eggs, offset price increases in other groceries.
Still, overall confidence is higher in New York than across the country, and the New York State Index of Consumer Sentiment now stands at 61.7, down 6.3 points from the last measurement in the first quarter of 2022, the Siena College Research Institute said in its June poll.
And consumers picked up their spending from May to June, underscoring their resilience despite higher prices at the gas pump and in the grocery aisle, allaying fears that the economy may be on the brink of recession. US retail sales rose 1% in June, after falling 0.1% in May.
But with shortages and lower raw material costs, can businesses attribute rising costs to inflation? For some companies, this may vary based on competition.
“It depends on how strong your market power is,” Melkonine said.
The Associated Press contributed to this report.