Economists say inflation will not last; CEOs beg for a different Reuters

Authors: Aishwarya Venugopal and Manas Mishra

(Reuters)-Executives of companies that handle everything from airplane parts to cars and steak burritos have disagreements with economic policymakers on the persistence of the recent U.S. inflation spike and believe that price increases will occur for the rest of the year Hit profit margins and profits, if no longer.

In recent weeks, rising inflation has been the direct focus of Fed officials and other global policymakers. There is growing disagreement between those who worry that prices may rise too quickly and those who think the economy needs more time to grow.

The International Monetary Fund said on Tuesday that it considers inflationary pressures to be a temporary result of a “mismatch between supply and demand” when the economy reopens. It is expected that inflation in most countries will return to pre-pandemic ranges in 2022.

Nonetheless, it warned that persistently high inflation data may lead to a “reassessment” of the outlook for monetary policy by the Federal Reserve and other developed countries’ central banks.

A global survey of nearly 500 economists this month also concluded that the recent rise in inflation in major global economies will be temporary. According to a Reuters survey, more than 70% of economists, or 152 out of 209 economists, said that the current upward trend in global inflation is temporary.

However, as the economy recovers after COVID-19, supply chain disruptions and labor shortages are pushing up prices, large companies are increasingly sounding alarm bells in quarterly earnings reports.

General Electric (NYSE:) Co-CEO Larry Culp said on Tuesday that his industrial group is facing inflationary pressures, which will intensify for the rest of the year. Culp, along with executives from other manufacturers, has seen the economy overheat.

People “question, you know, whether the price increase we are seeing is permanent or temporary,” said Neil Mitchell, chief financial officer of Raytheon Technologies, a US aerospace manufacturer, in an interview with Reuters. But he said he needs more time to see how it turns out and “how the Fed is performing in this regard.”

competitor Lockheed Martin The company’s (NYSE:) Chief Financial Officer Kenneth Posenreid said on Monday that the price of the most popular version of the F-35 fighter jet may rise, citing inflation.

Last week, Harley-Davidson (NYSE:) told investors that it imposes a 2% pricing surcharge on some bicycle models in the United States to mitigate rising costs caused by rising raw material prices.

The owner of the 118-year-old motorcycle brand also warned that soaring raw material prices and supply chain and logistics bottlenecks will hurt its earnings in the second half of the year.

Others say that price increases will be more difficult to offset.Restaurant chain Chipotle Mexican Barbecue Company (New York Stock Exchange ticker:) The increase in menu prices in the second quarter increased profits, and this gain will be offset by rising beef and freight costs in the short term.

Similarly, the global consumer goods group Unilever (NYSE:) Plc warned last week that due to rising freight, packaging and distribution costs, all-round input costs have risen, and soaring commodity costs will squeeze its full-year operating margins.

Carlos Tavares, CEO of Stellantis NV, said last week that economists driving the outlook for moderate inflation need to wake up.

“When I asked experts and economists, they said,’No, no, no, this will not happen. There is no structural inflation.’ That’s what they said. What I see is that inflation is coming.”