Small businesses clearly aren't escaping inflation.
The net percentage of small business owners increasing their prices rose to 61% in January, the highest reading since 1974 and up from 57% in December, according to the National Federation of Independent Businesses.
“More small business owners started the new year raising prices in an attempt to pass on higher inventory, supplies, and labor costs,” said NFIB Chief Economist Bill Dunkelberg. “In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions.”
Meanwhile, a total of 59% of U.S. CEOs think inflation will last at least into next year, according to a Conference Board survey.
“To cope with rising inflation, [CEOs globally] plan balancing actions that include cutting costs, passing increases downstream to consumers and end users (the strategy most favored by U.S. CEOs),” the report said.
So it looks like an inflationary spiral. Higher prices for raw goods lead to higher prices for finished goods, which lead to higher wages. And then rising wages push prices up further.
Hedge fund heavyweight David Einhorn, founder of Greenlight Capital, says raging inflation will push the economy into recession.
“Eventually, we believe inflation will cause a recession, regardless of what the Fed chooses to do,” he wrote in a letter last month obtained by CNBC.
“The higher prices of necessities will ultimately cause low-income consumers to cut back on other things. There are signs this is already happening.” Consumer prices soared 7% last year, the biggest 12-month increase in 39 years.
“We believe that the inflation problem is so embedded that to successfully fight it, the Fed would have to sacrifice the primacy of the financial markets,” Einhorn said.
