Corporate America's 'greedflation' window of opportunity is closing as consumers tighten their purse strings - and the markets will feel the pinch, experts say

Inflation has been a problem for Americans for a while now, but for companies it is an opportunity to make a lot of money.

Corporations have been able to pass on higher input costs to their customers in the form of higher profits.

The oil majors at the top of the pile have made a lot of money while consumers have to pay more for gas. According to The Washington Post, Chevron and ExxonMobil had tripled their profits in the second quarter.

People are spending record amounts of money on things like running their cars and cooling their homes. Craig Erlam, senior market analyst at OANDA, said it would be difficult to pass on those costs to consumers. He said that companies will find it harder as households tighten their purse strings.

The squeeze will take its toll and the window of easily passing on cost increases to end consumers is closing.

There was a time when it was easy to pass on higher costs to protect margins due to a healthy labour market and higher savings after the Pandemic. "That was never going to last and going forward, it's going to be much more difficult."

According to Goldman, US companies will find it harder to pass on price increases to consumers, meaning corporate profitability will be squeezed.

Michael Hewson, chief market analyst at CMC Markets, believes that companies won't be able to absorb higher input costs, so they will have to pass on inflation to consumers.

The price of raw materials and energy has increased and the capacity for companies to absorb that has diminished, which means prices are unlikely to come down quickly.

The window in which companies can pass on price increases to consumers without seeing demand destruction is becoming more of a necessity as opposed to an opportunity due to underlying problems with the flow of raw materials. He said supply chains issues are apparent at Chinese ports, and while these have diminished as globalization reverses the reorientation of supply chains is likely to continue.

Rakeen Mabud, chief economist at The Groundwork Collaborative, asked if the supply chain we currently have was the inevitable supply chain that we could have.

We don't have that because the supply chain that we have is built by large companies.

"Companies are always going to be looking for opportunities to jack up prices beyond what their input costs would justify along with the "greedflation" narrative and this window of opportunity is new and potentially changing."