Yes, inflation has slowed, but business is still paying the price – and so are you

(This column originally appeared in The Guardian)

Consumer prices ticked up again in March, rising to anywhere from 3.2% to 3.8% year-over-year, depending on the rate you’re tracking. Of course, that’s way down from what it was back in 2022. But don’t tell that to any of my clients – or people running businesses in just about every industry across the country. For them, prices are not only rising but are significantly – significantly! – higher than they were when Joe Biden took office.

Want some examples?

• If you’re in the manufacturing business, you’re paying 11% more for plastics and resins, 24% more for industrial gases, 23% higher prices for machinery and equipment, 35% additional cash for the oil and grease that lubricates those machines, and 18% more for industrial chemicals (which get used in just about everything) since 2021. Overall, your total costs of manufacturing are 26% higher than they were just three years ago.

• In the construction business the good news is that lumber prices have actually fallen 25% since 2021. But that’s been more than offset by a rise in iron and steel (27%), cement and concrete (42%), and staples, nails, spikes and tacks (21%). Overall, construction materials costs have increased about 30% since the last inauguration.

• My clients in the food manufacturing and service industries are also feeling the pain. Food manufacturing costs have risen 24% since 2021, the cost of fertilizer is up 34% and animal feeds are up 10%. Now do you understand why restaurant owners are struggling to stay in business and have resorted to adding surcharges for credit card and other fees?

• Once you make any of your products, you’ll be paying 8% more for domestic freight and a whopping 49% more to ship or receive stuff overseas. Packaging all your products with paperboard boxes and other components will also cost you 38% more than it did three years ago.

• Since 2021, hourly wages are up 16% and health and property insurance rates are up 8% to 10%. And interest costs have quadrupled, with most of my clients paying two to three points over the 8.5% prime rate.

This didn’t happen overnight. It’s taken a few years. For businesses around the country, today’s inflation isn’t the problem. The dramatic rise in just about every core material and overhead cost that it takes to make and deliver products and services? Yeah, that’s the real problem.

None of this is news to anyone running a business. I share this information with associations and business groups representing industries from all over and the audience just nods their heads in solemn agreement (before heading to the bar). All you have to do is look at the most recent survey from the National Federation of Independent Businesses, which places small business optimism at an 11-year low, to realize how deep this problem goes.

So what can businesses do about this? Of course they raise prices (although my smartest clients are doing this discriminately by looking closely at customer profitability and targeting price increases where they can). Businesses are also investing more in technology and capital improvements, although many are being hindered by the much higher costs of capital.

Other tactics you’ve probably seen: shrinkflation, where businesses charge the same for less (what? only two meatballs instead of three with my spaghetti?), tougher negotiations, pushing back on added goodies (I haven’t seen a chocolate on my hotel pillow since well before Covid) and a pullback on hiring, with job openings now at a pre-Covid level.

Inflation is still a major problem. Consumers are getting pinched with higher prices and stagnant incomes. Meanwhile, small businesses – which employ half of the country’s workers – are dealing with significantly higher costs. All of this has happened since Biden took office. Is this his fault? History will decide. Regardless, it explains why the president’s approval ratings are so low. And it doesn’t bode well for him this election year.