Report
How could companies react to a negative supply shock?
Companies (we look at the United States and the euro zone) are currently faced with a major negative supply shock, due to rising commodity prices, semiconductor and maritime transport prices and hiring difficulties. The question then arises as to how companies react to this negative supply shock. There are essentially three possibilities: A rise in corporate selling prices, leading to a rise in inflation, with the well-known consequences of such a rise; A reduction in profit margins without a rise in prices, offsetting the rise in costs; A slowdown in labour costs, which offsets the rise in other costs, prevents an overall fall in supply and a rise in inflation or a fall in profit margins. We are currently seeing: In the United States, price increases and a slowdown in labour costs, resulting in higher profit margins and earnings; In the euro zone, a fall in profit margins despite the slowdown in labour costs.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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