The ongoing coronavirus pandemic continues to hit the economy especially hard. Not exclusive to America, the entire globe is experiencing the financial ramifications as prices and demand for goods hit an all-time high. The largest inflation in 40 years, December prices rose seven percent to end the year. As quarter one of 2022 is underway, there are no signs of the market cooling in the midst of the rise in COVID cases. This puts business owners at risk for major setbacks, even the potential of closing for good.
Since March 2020, economists have paid close attention to the market and how the pandemic would impact the country’s economic and resource stability. Food costs continue to rise as shortages and bare shelves at grocery stores have become the norm. The federal government provided a litany of economic bailouts for businesses and citizens, yet nothing could have prepared customers for the state of this economy. Inflation is causing a direct threat to the nation’s recovery post-pandemic.
“$4.9 trillion in COVID-19 stimulus spending has led to one of the highest and most sustained levels of inflation in U.S. history. While government stimulus spending was intended as a form of relief, and low and middle-income families as well as small business owners were promised that their taxes would not increase, Americans everywhere are now paying a hidden tax called inflation,” said Senator Rand Paul (R-KY) and Ranking Member of the U.S. Senate Committee on Small Business and Entrepreneurship. “In recent months, prices on nearly everything from gas, food and clothes to electricity, car prices and rent, have all increased, and unfortunately it’s only going to get worse. Congress needs to realize that further spending at this time of rapidly rising prices is only going to continue the trend of rising prices on this nation’s already vulnerable businesses and families.”
For metro Detroiters, inflation is hitting especially hard. Several industries have felt the effects of the pandemic and have been forced to make difficult decisions for their businesses. Even the most unlikely businesses are experiencing rare difficulties in navigating.
Ariane Railey, owner of Makeup Is Art, makes luxury cosmetics at affordable prices. Following being laid off as a result of the pandemic in March 2020, Railey launched her makeup brand in June of the same year. Now, the once-thriving business has caused the owner to seek full-time employment to not only sustain her business, but also her life.
“Before I was able to not work and sustain with my business, but now I have to work to sustain my business. At some point, I’m going to have to have to be like, okay is this it?” said Railey.
Inflation not only drives up the costs of materials, but also greatly impacts the availability of items to make businesses run. Makeup Is Art is also experiencing delays in shipping, which has affected the number of orders she is able to produce and send to customers.
“Everything has gone up. Not only has the shipping price gone up, but it takes so long to get them now. Now, it’s affecting my demand,” said Railey. “I reach my demand sometimes and have to scale back on my content or something so I don’t get a huge influx of orders that I can’t meet.”
To compensate, businesses have raised their price points to bring in funds or to simply break even. Still, small business owners are making tough decisions on raising prices or walking away from their dream.
“I still believe at the end of the day when you’re an entrepreneur, you still believe in your brand and you definitely don’t want to give it up. So, you are faced with a decision on ‘do I raise my prices a little bit just to stay in business?’ That’s where I’m at now. I’m kind of at a fork in the road,” said Railey. “My business is doing well, but will it do as well if I raise my prices?”
This year, officials from the Federal Reserve anticipate four additional interest rate increases in an effort to curb the cost of inflation. Beginning in March, customers and business owners will see the first interest rate hike. Across Michigan, residents are expressing concerns about inflation. The Detroit Regional Chamber polled registered voters statewide and, among other concerns, inflation ranks among the highest with 90 percent of participants expressing their disquiet. Results were released in December 2021 leaving voters to worry about the economy and how it will affect the 2022 midterms.
“Two years into the global pandemic, the Chamber continues to go inside Michigan households and businesses to assess how voters feel about the state’s health, economy and political situation,” said Sandy K. Baruah, president and CEO of the Chamber in a press release. “The polling shows a growing disconnect between personal consumer behavior and concern over inflation. Voters, while confident of their own job security and finances, are pessimistic about the overall state of the economy in large part due to inflation, which many have never experienced in their lifetimes.”
The uncertainty of the pandemic and its effects on the economy will linger as the nation continues to fight the coronavirus. The Federal Reserve anticipates interest rates to increase in March, June, September and December.
About Post Author
