Economists say inflation won't last; CEOs beg to differ

US Aerospace

28/07/2021 12:00

By Aishwarya Venugopal and Manas Mishra
    July 28 (Reuters) - Executives who run companies making
everything from airplane parts to cars and steak burritos are at
odds with economic policy makers on how durable the recent surge
in U.S. inflation will be and see higher prices hitting margins
and profits through the remainder of this year, if not longer.
    Rising inflation has been the immediate focus of Federal
Reserve officials and other global policy makers in recent
weeks. There is a growing divide between those worried prices
may be increasing too quickly and those arguing that economies
need much more time to grow.
    The International Monetary Fund said on Tuesday it views
inflation pressures as the transitory result of "supply-demand
mismatches" as economies reopen, with inflation expected to
return to pre-pandemic ranges in most countries in 2022.
    Still, it warned that persistently high inflation readings
could lead to a "reassessment" of the monetary policy outlook by
the Federal Reserve and other central banks in advanced
countries.  urn:newsml:reuters.com:*:nW1N2OA00Q
    A global survey of nearly 500 economists taken this month
also concluded recent rising inflation in key economies around
the world would be transitory. Over 70% of economists, or 152 of
209, said the current uptrend in global inflation was
transitory, the Reuters poll showed.
    Big corporations, however, are increasingly sounding the
alarm in quarterly earnings reports as they struggle to cope
with supply chain disruptions and labor shortages that are
pushing up prices as economies rumble back to life after
COVID-19. 
    General Electric Co  GE.N  Chief Executive Larry Culp said
on Tuesday his industrial conglomerate is facing inflationary
pressure that will intensify in the remainder of the year. Culp
joins executives at other manufacturers who see an overheating
economy.  urn:newsml:reuters.com:*:nL4N2P32B2
    People are "questioning whether, you know, what we're seeing
in terms of upward prices is permanent or transitory" U.S.
aerospace manufacturer Raytheon Technologies Corp  RTX.N  Chief
Financial Officer Neil Mitchill told Reuters in an interview.
But he said he needed more time to see how it plays out and
"where the Fed comes out in that regard."  urn:newsml:reuters.com:*:nL4N2P32HG
    Competitor Lockheed Martin Corp  LMT.N  CFO Kenneth
Possenriede said on Monday the price of the most popular version
of the F-35 fighter jet could increase, citing inflation.
 urn:newsml:reuters.com:*:nL1N2P21FF
    Last week, Harley-Davidson Inc  HOG.N  told investors it has
a 2% pricing surcharge on some bike models in the United States
to mitigate mounting costs due to raw material price inflation.
 urn:newsml:reuters.com:*:nL4N2OX276
    The owner of the 118-year-old motorcycle brand also warned
that soaring raw material prices and supply chain and logistics
bottlenecks would hurt its earnings in the second half of the
year.
    Others are saying rising prices will be harder to offset.
Restaurant chain Chipotle Mexican Grill Inc's  CMG.N  profits
were lifted by menu price increases in the second quarter, a
benefit that will be offset in the near-term by higher beef and
freight costs.  urn:newsml:reuters.com:*:nL4N2OW38E
    Similarly, global consumer conglomerate Unilever Plc
 ULVR.L  last week warned that surging commodity costs would
squeeze its full-year operating margin as a full spectrum of
input costs rises on higher freight, packaging and distribution
costs.  urn:newsml:reuters.com:*:nL1N2OY09B
    Stellantis NV  STLA.MI  CEO Carlos Tavares said last week
that economists pushing a tame inflation outlook need to wake
up.  
   "When I ask the experts, the economists, they say, 'No, no,
no, it's not going to happen. There is no structural inflation.'
That's what they say. What I see is that inflation is coming."

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FACTBOX-U.S. companies raise product prices to tackle wage, raw
material inflation     urn:newsml:reuters.com:*:nL4N2OX303
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 (Additional reporting by Ben Klayman in Detroit, Rajesh Kumar
Singh in Chicago and Mike Stone in Washingon; writing by Anna
Driver; Editing by Dan Grebler)
 ((anna.driver@thomsonreuters.com; 646-223-4342; Reuters
Messaging: anna.driver@thomsonreuters.com@reuters.net))