From the course: Economics for Business Leaders
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Producer inflation impacts on corporate profits
From the course: Economics for Business Leaders
Producer inflation impacts on corporate profits
- Consumer inflation is what business media, the average person, and policymakers are usually focused on when they talk about inflation. But business leaders also need to be focused on something called producer inflation. And the reason is simple. Producer inflation measures the cost of the inputs required to run a business, including manufactured goods, semi-manufactured goods and commodities. And producer inflation occurs in both manufacturing and service supply chains. Most importantly, while consumer inflation is generally low and stable, producer inflation can have big swings that impact profitability. So while the Feds target for consumer inflation in the United States is a low 2%, there is no target for producer inflation, which can be 4%, 6% or more. A big rise in producer Inflation means that company costs will rise. That's bad for corporate profits and for company profit margins. That's why business…
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