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Inflation fears tear through C-suites this earnings season

C-suite executives are letting it be known that inflation is a real threat to profits this year, despite a barrage of macroeconomic forecasters saying any increases in commodities such as oil is transitory.

The number of mentions of "inflation" during first quarter earnings calls this month have tripled year over year, the biggest jump dating back to 2004, according to new research from Bank of America strategist Savita Subramanian. Raw materials, transportation, and labor were cited as the main drivers of inflation.

Subramanian's research found that the number of inflation mentions has historically led the consumer price index by a quarter, with 52% correlation. In other words, Subramanian thinks investors could see a "robust" rebound in inflation in coming months in the wake of the latest round of C-suite commentary.

"Inflation is arguably the biggest topic during this earnings season, with a broad array of sectors (Consumer/Industrials/Materials, etc.) citing inflation pressures," Subramanian notes.

To be sure, the cost of doing business is on the rise as a snapback in global growth as the pandemic rounds the corner has sent commodities prices significantly higher.

Inflation mentions by executives have surged this earnings season.
Inflation mentions by executives have surged this earnings season.

Oil prices are up more than 400% from a late April 2020 bottom. Copper prices have surged 80% during that same timespan and are not at decade highs. The average price of gas in the U.S. since late April 2020 has gone from about $1.74 to nearly $3.00. Not helping matters for companies are the new costs in businesses to keep workers safe from the ongoing pandemic.

Corporate America is now asking consumers to foot the bill in an effort to protect their bottom lines from inflation and COVID-19 pandemic costs, and their stock prices. Hence, Subramanian's call for some heady readings on the consumer price index shortly.

"We took price increases in every region of the world, and range from 5% to 12%," Whirlpool CFO Jim Peters recently told Yahoo Finance Live. "Those are driven by commodity cost increases, and it's something we have done historically."

Important commodities for Whirlpool have surged since March 2020 — steel prices alone have skyrocketed about 75% from March 2020.

Outside of Whirlpool, consumer products giants Procter & Gamble and Kimberly-Clark have signaled this month that prices will go up soon on a host of items.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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