US Consumers Struggle with Inflation's Third Wave

The US is experiencing a third wave of inflation, which UBS Global Wealth Management Chief Economist Paul Donovan calls "profit-led inflation." This occurs when companies use higher input costs as an excuse to hike prices, but are really profit-led. While material costs have decreased, labor costs remain elevated, and corporate profits have played a large role in price increases. However, profit-led inflation may damage a company's brand if consumers see the reasons for raising prices as disingenuous. Donovan believes that at some point, either governments or consumers will realize this and threaten brand values, causing companies to rethink their pricing strategies.