You can’t help but hear about inflation these days. While we can find the positive signs that the economy is showing at every turn, it’s seemingly the only concern at the moment. But should you worry about inflation if you’re considering opening a business of your own? With a little bit of help and dissemination from our valued partners at FRANdata, we hope to provide you with some reliable new information to consider.
Last month, FRANdata posted an intriguing blog post on this subject and it’s definitely worth your time to consider reading the full article. In the meantime, let’s review some of the key takeaways:
Facing Uncomfortable Truths
Because we can’t sugarcoat the findings, it’s advisable for consumers in the U.S. to face a few uncomfortable truths. Yes, inflation is occurring, and yes, it’s occurring at levels not seen in three decades. The latest information from the U.S. Department of Labor’s consumer price index (measuring what we pay for goods and services) from last month reveals an increase of 0.8%, up 6.8% from a year ago. The so-called core indexes, which measure increases for common purchases such as fuel, groceries, and energy, are each in record high territories for the past few decades. While concerning, these rate increases are telltale signs that the pandemic—now circulating the Omicron variant—has yet to release its grip on society, our business, and our commerce.
Now the Good News
Consumer spending is up. Way up. Unemployment is at a historically low level. Hiring, and the demand for workers in almost every industry, is rampant. As a whole, the economy continues its robust growth. Demand for common goods such as automobiles, furniture, appliances, and other big-ticket retail items is red hot and shows no signs of slowing, thanks to the holiday shopping season. Even travel has once again surpassed pre-Covid levels.
The Reassurance You Need to Hear
Inflation can be mitigated through federal action. Raising interest rates, which the Fed has recently indicated it will do, will hopefully cool inflationary pressures. The current plans call for an accelerated phaseout of bond-buying stimulus and the possibility of three separate rate hikes in 2022. As Fed Chair Jerome Powell remarked, “We are prepared to use our tools to make sure high inflation doesn’t get entrenched. This is a strong economy, one in which it’s appropriate for interest rate hikes.” In short, help is clearly on the way.
FRANdata’s assessment goes on to state that the changes in the labor pool and consumer behavior may have been permanently altered by the pandemic’s conditions—and that may not be an altogether unwelcome development. If you’re a current business owner—or perhaps even a prospective one, FRANdata openly advocates for making strategic capital investments during this time. Regardless of the chatter about the current state of inflation, there seems to be a consensus among economic experts that this is nothing like a redux of the mid-70s period of stagflation. Rather, it appears to be an extraordinarily unique opportunity to plan your next move.
If you’d like to discuss the current economic conditions in further detail, and how they might affect your strategy to become a new business owner, you can always make a no-cost, no-obligation appointment with one of our qualified FranNet consultants. We can assess the results of your Entrepreneurial Readiness Profile and determine a few franchise concepts that match up well with your strengths and financial tolerance.
You may even find yourself giving thanks for an era such as this, somewhere down the road…
