US High Inflation Hits Industry Too... 79% of Companies Discuss 'Inflation' in Earnings Calls

Used Car Prices Soar, Repair Costs Jump... Insurance Companies' Burden Increases
"Domino Effect from Parts to Finished Products Expected"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Inflationary pressures in the United States are also impacting the industrial sector. Experts pointed out that attention should be paid to changes in overall spending plans of businesses and consumers, along with additional domino price increases.

On the 14th (local time), the Wall Street Journal (WSJ) reported that an analysis of 280 companies that reported quarterly earnings showed that 79% of them discussed inflation during their conference calls.

The Journal stated, "Inflation is penetrating the U.S. industrial sector, hitting companies in unexpected areas beyond rising material, logistics, and labor costs," adding, "With no signs of inflation slowing down, companies will pass on cost burdens to customers to preserve profits."

A representative example is the increase in auto insurance premiums due to rising used car prices, which are considered a major cause of U.S. inflation. According to insurer Allstate, used car prices began rising at the end of 2020 and accelerated in 2021, surging 68% compared to early 2019.

In the first half of last year, Allstate's auto insurance premium revenue reached $1.7 billion (approximately 2.0391 trillion KRW), largely due to reduced accident frequency from decreased outdoor activities during COVID-19. However, in the second half, as accident numbers returned to pre-pandemic levels, insurance claims increased, resulting in a $450 million loss in premium revenue during that period. Consequently, Allstate raised auto insurance premiums in the second half of last year to reflect this.

Glenn Shapiro, head of Allstate's real estate liability division, said, "The supply issues and chip shortages driving price increases will not be resolved this year," and forecasted, "Used car price increases will stabilize in the fourth quarter of this year." According to recent data released by the U.S. Department of Labor, used car prices in January rose 40.5% compared to the same month last year.

Chester Spatt, professor of finance at Carnegie Mellon University and former chief economist at the U.S. Securities and Exchange Commission (SEC) from 2004 to 2007, said, "Price increases start with small parts and then cascade to large finished products." He added, "It's not just inflation that is problematic, but the resulting changes in plans by businesses and consumers that can affect the overall economy."

This content was produced with the assistance of AI translation services.