In our current economic climate, inflation is a much-discussed topic. Central banks globally are closely watching it, and many people are wondering what effect it will have on their lives and businesses.
Inflation affects different industries in different ways. For example, high inflation can be good for the agriculture industry as farmers can charge more for their crops. Conversely, it can be bad for the manufacturing industry because the cost of raw materials goes up and companies must pass those costs on to consumers.
Let’s take a look at the effect it has on some industries
Transportation and logistics
To keep up with inflation, businesses often have to raise their prices, which leads to increased costs for consumers. The transportation industry is no exception. Rising fuel prices, labor costs, and maintenance expenses can cause higher transport fares for consumers. Additionally, trucking companies may have to raise their rates to cover the increased cost of diesel and trucker wages. Inflation can also lead to higher interest rates making it more expensive to finance new vehicles or expand existing fleets.
Entertainment
The entertainment industry is notoriously volatile. One of the biggest factors affecting its profitability is inflation. When inflation rises, it becomes more expensive to produce movies, television shows, and other forms of entertainment. It could lead to higher prices for tickets and concessions, and higher wages for employees in the industry. Moreover, with the rising demand for building materials, movie producers have been struggling to keep up with production costs.
Telecommunications
Inflation affects telecommunications companies in a few ways. First, inflation will cause an increase in the costs of services and capital expenditure. This will naturally result in higher prices for consumers. Second, since the value of money decreases with inflation, telecommunications companies receive less revenue from services they provide over time. This can lead to a decrease in investment in the telecommunications industry, as well as a decline in its overall competitiveness.
Education
The education industry is not immune to inflation, and the cost of tuition, books, and other supplies has been rising steadily for some years. This can be a major financial burden for students and their families, particularly if they are unable to keep up with the increased costs. Inflation can also lead to funding cuts for education programs which will make it difficult for many students to afford to attend college or university.
Animal products
Meat products such as beef and pork are getting more expensive due to labor shortages and the increased costs of grains and energy in the meat industry. According to Costco, it is paying 20% more for beef than it did in the previous year. This is in part due to increasing demand from restaurants that are reopening as well as from countries like China and Vietnam that are importing more pork and beef from the United States. Cheese, milk and eggs has risen by an astronomical rate in 2022, with cheese priced at 16,3% more since the beginning of the year. Conversely, products manufactured from cheese production, such as whey protein and curd as a by-product, also see an increase in price as a direct result of the increase in price of cheese and its production.
Final thoughts
Inflation impacts different industries in various ways. While it is true that some industries are relatively unaffected, others feel a greater press. It is therefore important for business owners to be aware of how their industry in particular will be affected in order to create an action plan of how to ride out these times of high inflation.
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