With the price of commodities rising and every day items slowly becoming more expensive economists seem to agree that the threat of inflation is looming and may just be around the corner.
The Federal Reserve has kept interest rates at near-zero for sometime but it is unclear how much longer that will be the case.
Inflation fears have already begun to impact stocks and the price of oil is on the rise. And in April, the Consumer Price Index grew by 4.2%, the largest annual increase since 2008.
In Maryland job growth slowed considerably between March and April, with the latter month seeing an increase of fewer than 4,000 jobs. The state’s May jobs numbers will not released until June 23.
But what will those numbers look like? And how will inflation affect Maryland’s post-pandemic economic recovery?
“The threat of inflation on Maryland’s post-pandemic economic recovery will most negatively impact those who are at or below the poverty level, as well as the “middle class” taxpayers, in our state,” Washington County Chamber of Commerce President and CEO Paul Frey told MarylandReporter.com.
He added: “The consumers with more disposable income will continue to pay the market price for gas, groceries, and restaurant fare, and those that don’t have the disposable income will likely go without some, or any, of those items.”
Frey said inflation will force businesses to make tough decisions about what items they purchase.
“Retail, service, construction, and restaurant companies will need to determine what products they can afford to purchase, at their cost, and then calculate what they can charge their respective customers to stay competitive and still make a profit to stay in business. Superior customer service and excellent quality will set businesses apart from their competitors. Now is an especially good time for business owners to ask their employees how to do things more efficiently and effectively.”
And businesses will have to make other tough decisions as well, Frey said.
“As the job growth continues to slow, the price for labor in June will keep increasing until it is at a level that will attract enough workers to fill the positions needed to run any given business. In some cases, like restaurants, businesses may have to shorten their days and hours of operation. In other cases, like construction and manufacturing, businesses will be forced to pay lots of overtime to ensure the work they have in the pipeline gets completed.”
Howard County Chamber of Commerce President and CEO Leonardo McClarty, like Frey, said that he too is concerned about the threat inflation poses to the state’s post-pandemic recovery.
“I believe one can’t help but be somewhat concerned. Many business leaders are already concerned with issues such as labor shortages and supply chain disruption. Increased cost of goods would certainly be another layer of concern as all of these issues impact purchase power and consumer confidence,”
Frederick County Chamber of Commerce President and CEO Rick Weldon said it is hard to pinpoint the impact inflation would have on a specific state.
“Inflationary pressure on the economy is a result of national policy decisions, so Maryland, or any state for that matter, is honestly really limited. Additionally, the impact of federal deficit spending on pandemic recovery cannot be ignored.”
Weldon said the best way for businesses to “protect themselves” is to “manage inventory, reduce overhead, focus on core products and services, and preserve cash.”
Weldon cautioned that Congress could make the situation worse if the response to inflation is simply to spend more money.
“Sadly, a study of economic indicators over the last year suggests that the national economy was already well into recovery prior to the huge outlays in business and personal stimulus. Adding more stimulus through deficit spending could even do more harm than good.”