{"id":10844,"date":"2022-08-30T14:49:00","date_gmt":"2022-08-30T21:49:00","guid":{"rendered":"https:\/\/essential.construction\/news\/?p=10844"},"modified":"2022-08-30T14:49:00","modified_gmt":"2022-08-30T21:49:00","slug":"6-tips-for-defanging-inflation","status":"publish","type":"post","link":"https:\/\/essential.construction\/news\/6-tips-for-defanging-inflation\/","title":{"rendered":"6 tips for defanging inflation"},"content":{"rendered":"
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Dive Brief:<\/h3>\n

Company leaders facing the worst price pressures in four decades can take some of the bite out of inflation by following six strategies, ranging from increasing inventory to redoubling efforts to retain talent, global tax consultant Deloitte said in a report.
\n\u201cThe most obvious strategy requires taking a risk: Pass along higher costs to customers and they may just pass up doing business with your company,\u201d according to Deloitte<\/a>.
\nYet the rewards of increasing prices often outweigh the risks, Deloitte said, noting that a company with a 35% gross profit margin that raises prices by 5% would need to suffer a 12.5% decline in sales before the price increase begins to erode profits.<\/p>\n

Dive Insight:<\/h3>\n

Inflation slowed more than forecast last month but persisted near a four-decade high.<\/p>\n

The consumer price index rose 8.5% compared with July 2021<\/a> after increasing 9.1% on an annual basis in June. Falling prices for used cars, apparel, air fares and energy \u2013 especially a 7.7% decline in gasoline prices \u2013 blunted gains in other goods and services.<\/p>\n

In another hint that price pressures may be easing, the producer price index \u2013 a measure of what suppliers charge \u2013 rose 9.8% last month in the smallest annual increase<\/a> since October. In June the index surged 11.3% compared with a year earlier.<\/p>\n

Still, wages climbed in July at a 5.2% annual pace for the second straight month, suggesting that broad-based price gains may have triggered a wage-price spiral.<\/p>\n

\u201cAs disruptive as inflation may be now, the risk is that it will become embedded in the economy, generating expectations that make it difficult for companies to stabilize wages,\u201d Deloitte said. Company leaders should consider blunting the harm from inflation by:<\/p>\n

Reducing accounts receivable and increasing accounts payable. <\/strong>The depreciating dollar gives an advantage to companies that delay when they pay suppliers and nudge customers to speed up payment, according to Deloitte. That said, companies \u201crisk alienating dependable suppliers at a time when supply chains are weak.\u201d<\/p>\n

Expanding inventories.<\/strong> During a flaring of inflation, companies that produce appreciating, nonperishable goods should consider holding on to more inventory, aiming to sell the goods later at a higher price, Deloitte said. At the same time, firms should keep in mind that their companies may end up with too much inventory if a recession undercuts demand.<\/p>\n

Shifting borrowing to shorter maturities.<\/strong> Borrowing costs have surged, with the yield on the benchmark 10-year U.S. Treasury note more than doubling to 3% from 1.3% a year ago. Firms that need to roll over loans or bonds may want to favor shorter maturities until the Federal Reserve stops tightening and long-term interest rates begin to fall, Deloitte said, while noting that current rates are still historically low.<\/p>\n

Considering a delay in big investments or acquisitions.<\/strong> A financial institution with a portfolio of 3% mortgages at a time when the prevailing rate on new home loans is roughly 6% may want to postpone major shifts in capital until the outlook for interest rates \u2013 and inflation \u2013 is clearer.<\/p>\n

Still, companies that wait may miss out on good opportunities for mergers or acquisitions, \u201cespecially with equities still down substantially from January,\u201d Deloitte said.<\/p>\n

Holding on to your workforce. <\/strong>High labor turnover often accompanies high inflation, as employees quit for better pay elsewhere. Talent retention efforts become critical, including investing in training, talent pipelines and labor-saving automation, Deloitte said.<\/p>\n

Most financial executives are navigating unfamiliar terrain as they deal with overheated prices, Deloitte said. \u201cThe last time many sitting CFOs faced a soaring inflation rate similar to today\u2019s would have been approximately \u2013 well \u2013 never.\u201d<\/p>\n<\/div>\n

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Filed Under:
\n Economy<\/a><\/p>\n<\/div>\n<\/div>\n

\u00a0<\/p>\n

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Dive Brief: Company leaders facing the worst price pressures in four decades can take some of the bite out of … Read more<\/a><\/p>\n","protected":false},"author":0,"featured_media":7303,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1066,457],"tags":[],"class_list":["post-10844","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-posts","category-construction-dive","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"_links":{"self":[{"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/posts\/10844","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/comments?post=10844"}],"version-history":[{"count":0,"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/posts\/10844\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/media\/7303"}],"wp:attachment":[{"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/media?parent=10844"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/categories?post=10844"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/essential.construction\/news\/wp-json\/wp\/v2\/tags?post=10844"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}