Trump's pump priming is helping companies make prices higher again
Donald Trump is giving many businesses an unexpected benefit on top of lower taxes and regulatory relief: He’s helping to restore their pricing power.
By pouring hundreds of billions of dollars of tax cuts and extra government spending into an already stretched economy, Trump is fostering an environment where firms such as conglomerate 3M Co. can raise prices because demand for their products is strong.
“The power is with the seller,” said Chris Williamson, chief business economist at consultants IHS Markit Ltd.
That’s a turn-around from the past decade, when executives often bemoaned their inability to lift prices because of their fear of sacrificing sales. The shift will help them pad profits that are already surging thanks to lower taxes.
It’s also good news for Federal Reserve Chairman Jerome Powell and his colleagues, who have struggled to lift inflation to their 2 percent target and hold it there. Policy makers took note of reports of a return of pricing power at their July 31-Aug. 1 meeting, according to the minutes of that gathering released last week.
Purchasing Power
It might not be so welcome to workers, who’ve had trouble winning bigger wage gains in spite of unemployment near a multidecade low. Faster price rises already are eroding what purchasing power they have -- a point that some Democratic opponents of Trump have made as November congressional elections approach.
Average hourly earnings adjusted for inflation fell 0.2 percent in July from a year earlier, notching the weakest reading since 2012.
https://www.msn.com/en-us/money/markets/trumps-pump-priming-is-helping-companies-make-prices-higher-again/ar-BBMxo3t?li=BBnbfcN
