New Kearney research shows US executives to be cautiously optimistic about inflation

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May 03, 2023, 09:00 ET

48% of more than 350 surveyed leaders are confident that the current inflation cycle is positive.
Executives' expectations about the duration of the inflationary cycle indicate it may be ending soon.
Uncertainty over future inflation could discourage investments and savings.

CHICAGO, May 3, 2023 /PRNewswire/ -- Global management consulting firm Kearney released a new study today on sentiment toward inflation, based on a survey of more than 350 US-based executives. The research was conducted across industries, including retail, healthcare, auto, tech, and banking, among executives of companies with at least 500 employees, about half of which have more than 5,000 employees. The executives surveyed ranged from CEOs and owner/partners to C-level executives, directors, vice presidents, and senior managers.

"While some degree of inflation is a necessary part of economic growth, as we've seen, not all inflation is positive, and the benefits it can yield are limited," Greg Portell, lead partner of global markets at Kearney. "Cost–pull inflation can lead to operational impacts such as higher inventory and labor costs, while demand inflation can distort financials and raise debt costs. Having taken a negative course for some time now, what we're now hearing from the executives we talked with is that the current inflationary cycle is more positive than negative."

The report's analysis of inflationary repercussions and executive attitudes includes the following aspects:

- Analysis of "good" vs. "bad" inflation and cost–pull vs. demand inflation
- Core inflation triggers and how they continue to influence economic trends
- "Positive" outcomes and operational responses to inflation
- Lower-management views on inflation that are less positive than others in the C-suite
- Executives' expectations on the duration of the next inflationary cycle
- Connection of Consumer Price Index deceleration to a more productive view of inflation
- Executives' concerns about the long-term impacts of inflation
- Actions being taken: a posture of "defined optionality"

The study finds that executive sentiment about inflation has warmed even as inflationary factors continue to impact larger indicators and the national response. In particular, pricing and supply chain issues continue to be disrupted as businesses get on their feet post-pandemic. Report research and analysis lays out unpredictable patterns as GDP has stabilized; pandemic measures, including $1.6 trillion in pent-up savings, still working their way through the economy; the Fed's speedy moves to raise rates and cool particular portions of the economy as well as what's likely to come next; and companies switching from reactive to proactive pricing programs.

Across executives, not all inflationary sentiment is equal, the study found. Some expressed concern that lower- and middle-income communities feel the worst impact from inflation. However, the gap between CEO and VP views of inflation is shrinking, indicating that there's more agreement about the economic pressures that businesses are facing.

A number of positive executive and operational responses to inflation were noted, including the following:

- Renewed innovation cycles
- A reset of stale categories
- Shifts away from "traditions"
- Pricing flexibility
- Struggles of competitors
- Investment opportunities, especially in innovation

"While our findings show that core inflation triggers have shifted, they continue to influence economic trends such as unpredictable GDP, an uncertain labor market, and supply chain whiplash," Portell notes. "Nonetheless, executives feel that the end is in sight. While they may be overly optimistic on timing, inflation seems to be evolving into more of a short-term than a long-term problem."

Read the full report here.

About Kearney

As a global consulting partnership in more than 40 countries, our people make us who we are. We're individuals who take as much joy from those we work with as the work itself. Driven to be the difference between a big idea and making it happen, we help our clients break through.

To learn more, please visit www.kearney.com.

Media contact:

Meir Kahtan
Meir Kahtan Public Relations, LLC
+1 917-864-0800
[email protected]

SOURCE Kearney