More companies are raising prices, thanks in large part to the increase in demand driven by President Trump’s fiscal stimulus of tax cuts and increased federal spending.
Higher demand for products of all sorts is creating an economic environment in which executives feel they can raise prices, Bloomberg reports — a big change from the years following the great recession, during which many companies complained that they had lost pricing power due to sluggish demand.
But what’s good news for businesses may not be so good for workers, Bloomberg notes, since recent increases in inflation have consumed most of the modest wage gains seen in recent months.
Economists have long puzzled over the cause and effect of price and wage increases, with some arguing that higher prices lead to demands for higher wages while others say that big jumps in worker pay are a key factor driving up prices. In recent months, only higher prices seem to be in play, as the chart below indicates, while wages continue to record lackluster gains, with inflation-adjusted average hourly earnings down 0.2 percent in July on a year-over-year basis.