By Drew Aldridge, Vice President, Middle Market Relationship Manager at The Bank of Tampa
We have all been keeping an eye on the news surrounding inflation and how it impacts our bottom line at home and at work. For business owners, inflation impacts labor, materials, and nearly all other components of their operating model. Moderate inflation can be positive because it has the potential to enable market growth, allows for adjustment of real wages and for market prices to align more closely to value, and of course—it is not deflation.
According to the Bureau of Labor Statistics, price increases rose at a slower pace in July. This can mostly be attributed to a drop in energy and gasoline costs, which pulled U.S. inflation down slightly from a four-decade high. The consumer price index (CPI) rose 8.5% in July year-over-year, down from 9.1% in June, which marked the fastest pace for inflation since November 1981. Core CPI, which excludes often volatile energy and food prices, held flat at 5.9% year-over-year.
Inflation in the Tampa Bay region was 11.2%, the highest in the country, and the only metropolitan area to experience double-digit inflation (Bureau of Labor Statistics). The inflation variance between Tampa Bay and the rest of the country is likely due to our recent influx of residents, an unemployment rate lower than the national average, and an increasingly educated workforce. For example, the share of workers in our region who are employed in the finance, legal, healthcare, and professional services fields is higher than it is when looking at the workforce nationally.
A clear explanation of what is causing the stubborn inflation depends greatly on the economist “du jour.” The complexity of the current inflationary cycle could largely be driven by the perfect storm, including COVID-19 relief funds, supply chain shortages, a tight labor market, as well as Russia’s invasion of Ukraine. This economic environment creates uncertainty for business owners, further exacerbating the situation.
According to a survey completed by the National Center for the Middle Market, more than 50% of middle market businesses surveyed see opportunities to introduce new products and services and expand into new markets, even though confidence in the overall economy has fallen 19 points, to 69% in the last year. However, nearly 40% of respondents identified inflation as their biggest concern, while nearly 25% indicated supply chain disruptions. Those same respondents have experienced a negative impact on fuel, raw materials, and wages. Many executives responded by increasing prices, wages, and delaying capital investments.
So, what direction are we headed, and when will these significant price increases end? I am no economist, nor can I see into the future. What I can tell you is that The Bank of Tampa is an independently owned—by its clients, employees, and stakeholders—bank offering local decision making and customized banking solutions specifically designed to fit the needs of your business. We have been a fixture in the Tampa Bay community for more than 38 years. Our Middle Market Banking team offers a combined 70 years of experience banking mid-sized businesses, and we are here to help businesses throughout the greater Tampa Bay community grow and thrive, no matter the economic environment.
If you are interested in learning more about what The Bank of Tampa has to offer, please contact me at (813) 872-1218 or by email at email@example.com.
The Bank of Tampa | Member FDIC