Bidenflation: Businesses Tell the Fed That Rising Costs Are Getting Easier to Pass On to Customers

 

By JOHN CARNEY

U.S. businesses are finding it easier to pass on increased costs to their customers and expect to keep raising prices in the months ahead, the Federal Reserve said on Wednesday.

The Fed, in its latest Beige Book report that collects business anecdotes from around the country, said that prices charged to customers increased at a “robust pace” across the United States. A few districts even reported an acceleration of prices.

Gone is any hint that inflation might be transitory, something Fed officials believed last year.

There is also no indication that the favored narrative of the Biden administration–that prices have been pushed up by corporate greed and monopolistic profits–is supported by data. Instead, businesses say they are raising prices because their own costs are rising.

“Rising input costs were cited as a primary contributing factor across a broad swath of industries, with elevated transport costs particularly significant. Labor cost increases and ongoing materials shortages also contributed to higher input prices,” the Fed said.

Demand remains strong despite the increases, bolstering the confidence of businesses that they will be able to continue to pass on higher costs. This makes businesses more willing to pay higher prices charged by their suppliers, locking in place a strong inflation feedback loop.

Businesses in New York “continued to report substantial increases in selling prices, input prices, and wages,” the New York Fed said. The Cleveland Fed said that labor “shortages and supply chain challenges resulted in widespread increases in wages, nonlabor costs, and selling prices.” The Richmond Fed said there was an “elevated rate of price growth” to do higher costs. In Chicago, wages and prices reportedly increased “rapidly” and prices in the Kansas City Fed’s territory saw a “robust” increase. Companies in the region covered by the St. Louis Fed reported an increased ability to raise prices. The Dallas Fed said prices rose at a “rapid clip.”

“Wages and price levels climbed notably,” the San Francisco Fed reported.

There was some positive news on inflationary pressures in Boston and Philadelphia.

“The labor market remained tight with modest growth, while wages and prices grew sharply. However, there were signs that wage and price increases may be plateauing,” the Philly Fed reported.

“Upward wage pressures remained substantial but eased for some positions. Prices increased moderately. Contacts were optimistic for spring but noted downside risks tied to inflation and supply chain disruptions,” said the Boston Fed.