In 2021, as the prices of raw materials, including organic cotton, experienced a sharp spike, the family behind White Lotus Home, a sustainable bedding company based in New Jersey, optimistically believed that the 20% to 25% price surges were a temporary phenomenon. They chose to absorb most of the cost increases at that time. However, earlier this month, Marlon Pando, the CEO of White Lotus Home, sent an email to customers, explaining that the 42-year-old company could no longer bear these costs, and as a result, prices would be raised in 2024.
In Boulder, Colorado, restaurateur Tony Hessel devotes his weekends to meticulously analyzing spreadsheets that help him manage the unpredictable fluctuations in ingredient costs. Although he has managed to lower prices on some menu items, he had no alternative but to raise prices on others. Inflation in the United States has undoubtedly moderated since reaching four-decade highs last year.
Yet, recent inflation indicators, the actions of cautious small businesses like these, and the widespread announcements of price increases by corporate giants such as Chipotle and Disney underscore a point Federal Reserve Chair Jerome Powell and others have emphasized for months: the path to lower inflation will be rocky. However, as this process continues, consumers’ patience — and, in some cases, their wallets — are wearing thin.
EY-Parthenon’s senior economist, Lydia Boussour, observed, “When we look ahead, what we’re likely to see in the economy is a decrease in demand. For businesses, this implies that their ability to pass on higher prices and increased costs to consumers will be limited.”