INFLATION IMPACT ON AREA BUSINESSES
Quick Hitters
Max Feller
Investment Advisor Representative Investment Partners LTD ( 330 ) 308 – 9707
Recently , inflation and its impact on our economy have been discussed at great lengths . The post-COVID economy has produced unprecedented inflation numbers over the past three years and because of that , businesses all throughout the country have been impacted . Today , let ’ s look at what inflation is and dive into some of the major ways that the changing economy impacts local businesses .
Inflation , to put it simply , is just the devaluation of someone ’ s ( or something ’ s ) purchasing power ( ability to buy things ). This can be for multiple different reasons , whether that be the increase of money supply in our economy , the rise of price for things we buy , or a multitude of other macro and microeconomic events . As stated above , someone or something is always impacted by inflation . In this case , our area ’ s businesses are feeling the impact .
While all businesses are naturally affected by any economic event , micro or macro , the severity of that impact differs by type and size of business . This rings true with inflation . This topic can easily get incredibly complex . Instead , we will look at the simple solutions as we look at these major effects below .
Rising Cost of Goods and Services
• Businesses must pay more upfront for things like inventory and raw materials . To counteract this , businesses will raise their prices to maintain their margins . This is fairly obvious but plays a crucial role in the overall picture .
Lower Demand From Customers
• As prices rise and businesses work to generate a profit , wages usually fall behind the overall economy . With less disposable income , American workers are less able to spend which causes lower demand . With lower demand , prices will continue to rise . This spiral can be very difficult to navigate .
Rising Interest Rates ( The Cost of Borrowing )
• To slow down inflation , the government has multiple tools at its disposal – one of which is raising interest rates . This means banks and lenders will charge a higher interest rate to borrowers , causing fewer businesses to borrow . The end result is a slowed economy and lowered inflation .
These inflation outcomes certainly have a direct effect on your business and personal livelihoods . It ’ s crucial to implement strategies in both areas in order to minimize the impact on you and your family . Productivity , efficiency , and reasonable sacrifice are paramount to maintaining success through serious inflation periods similar to our current situation . We look forward to being a resource to you and working through this together . If you have questions on this hot-button issue or would like to discuss strategies , please reach out to our team of advisors .
Investment Partners is headquartered at 419 West High Avenue , New Philadelphia , OH 44663 . Securities and advisory services offered through Commonwealth Financial Network ®, Member FINRA / SIPC , a Registered Investment Adviser . Investment Partners LTD is a Registered Investment Adviser . Additional advisory services offered by Investment Partners LTD are separate and unrelated to Commonwealth . Fixed Insurance Products and Service are separate from and not offered through Commonwealth Financial Network .