A majority of U.S. businesses are hiking prices at a rapid clip as they seek to offset the pain of soaring inflation and a lack of available workers, according to a survey of American CFOs published on Thursday.
The CFO Survey, a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, shows that finance chiefs are increasingly worried about labor availability, inflationary pressures and supply chain disruptions.
Nearly 90% of firms reported larger-than-normal costs increases — a sharp rise from just six months ago, when about 80% of businesses reported increasing the price of some goods.
Fewer than 20% of firms expect cost increases to abate within the next six months, and most firms anticipate the cost increases will last at least another 10 months, if not longer.
“CFOs indicate that these cost pressures are not abating and will likely be with us for some time,” Atlanta Fed economist Brent Meyer said in a statement. “Many firms, especially large firms, are passing on at least some of these cost increases.”
Firms reported two strategies in handling the rising costs: First, an overwhelming majority – about 80% – of firms experiencing the cost pressures are passing on at least some of the increases to customers through higher prices. Second, firms have said they are absorbing the cost increases by reducing margins, reducing costs in other areas, eliminating or substituting product offerings, adding contingency clauses into contracts and turning down work.
Despite the production challenges, however, most respondents in the CFO survey said they expected to see both employment and revenue growth in 2021 and 2022.