Some corporations are already winning big as President Joe Biden’s economic agenda drives up inflation.
Business analysts for some of America’s biggest firms expect Biden’s aggressive spending to increase the cost of goods, and to send corporate profits up with them, according to Bloomberg. The major injection of cash into the economy by the government has business leaders forecasting “at the very least, ‘transitory’ hyper-inflation ahead,” wrote Bank of America strategists in a recent note.
Another bumper quarter for Warren Buffett: Berkshire Hathaway boosted operating earnings by 20% and built its war chest to a near-record $145.4 billion https://t.co/o6FvKskxng
— Bloomberg (@business) May 1, 2021
“Higher mentions of pricing, coupled with a record net margin, suggest inflation so far has been positive for corporate earnings,” they continued. Other analysts agreed. “To a fundamental analyst, inflation is called ‘pricing power,’” co-founder of DataTrek Research Nicholas Colas said. “And it is very good for incremental corporate earnings.”
Iconic investor and Berkshire Hathaway chairman and CEO Warren Buffet said Saturday rising prices is leading to rising profits: “We are seeing very substantial inflation. It’s very interesting. We are raising prices. People are raising prices to us and it’s being accepted.”
Corporate earnings jumped five times faster than sales in the first quarter, according to data compiled by Bloomberg. That’s caused net profit to reach record levels, according to Bank of America. (RELATED: ANALYSIS: Is Biden’s Big Spending Starting To Backfire?)
Experts say this is being caused by rapid increases in prices on input goods, from lumber to oil to metals. Democrats and progressives have assured skeptics that their big spending won’t fuel excessive inflation, but business leaders are concerned: the word “inflation” was mentioned more times during earning calls last month than any times since 2011, according to Bank of America.
The inflation and price increase of input goods is already being carried over to consumers. Gas prices are up 22%, and Americans are feeling the pressure at the grocery store too. Citrus fruit prices are up almost 10%, bacon is up 8.1% and beef is up 7.1%.
Federal Reserve Chairman Jerome Powell said last week that the Fed expects inflation to tick higher in the short-term before settling back around its 2% target level, according to CNBC. (RELATED: Democrats’ Massive Stimulus Isn’t Likely To Wreck The Economy, Experts Say)
Some companies, particularly in the auto industry, have been hurt by a semiconductor shortage. But overall, corporate America is winning big so far under Biden: profits surged around 46% in the first quarter to all-time high levels, according to Bloomberg.