U.S. Executives Optimistic on Inflation Amid Challenges - report

A recent study by global management consulting firm Kearney has shown that 48% of the 350+ U.S.-based executives surveyed view the current inflation cycle as positive. The research, which spanned various industries including retail, healthcare, auto, tech, and banking, indicates that executive sentiment about inflation is becoming more optimistic, despite ongoing challenges in pricing and supply chains.

Greg Portell, Lead Partner of Global Markets at Kearney, points out that while some inflation is necessary for economic growth, not all inflation is beneficial. However, the executives surveyed perceive the current inflationary cycle as more positive than negative. The study discovered that opinions on inflation differ across management levels, with lower-management views being less positive compared to those in the C-suite.

The report delved into several aspects of inflationary repercussions and executive attitudes, including the analysis of "good" vs. "bad" inflation and cost-pull vs. demand inflation. It examined core inflation triggers and their continuing influence on economic trends, as well as the positive outcomes and operational responses to inflation.

The study also highlighted a narrowing gap between CEO and VP views on inflation, suggesting a growing consensus on the economic pressures businesses face. Despite concerns that lower- and middle-income communities may bear the brunt of inflation, several positive executive and operational responses have been observed. These include renewed innovation cycles, a reset of stale categories, shifts away from traditions, pricing flexibility, struggles of competitors, and investment opportunities, particularly in innovation.

Portell notes that although core inflation triggers have changed, they continue to impact economic trends such as unpredictable GDP, an uncertain labor market, and supply chain disruptions. The research also revealed the connection between Consumer Price Index deceleration and a more productive view of inflation, as well as executives' concerns about long-term inflation impacts.

Despite these challenges, the surveyed executives believe the end of the inflationary cycle may be near, viewing inflation as a short-term rather than long-term problem. This optimistic outlook, however, could be premature. As companies switch from reactive to proactive pricing programs and the economy continues to grapple with pandemic measures, including $1.6 trillion in pent-up savings and the Fed's rapid moves to raise rates, uncertainty over future inflation remains and could potentially discourage investments and savings.