Research Briefing

Pricing power tells winners from losers in times of inflation

US businesses are experiencing the hottest inflationary environment in 40 years, and those with the strongest pricing power will ride the inflation wave best. Financial services, technology, real estate, consumer staples, industrial goods and services, chemicals, insurance, and consumer goods and services – representing about 25% of US GDP and jobs – are best positioned if high inflation persists. Margins in those industries are highest and most stable, and production within them is concentrated among fewer firms. Plus, their equity returns outperformed as inflation worries rose in Q4 2021, a sign investors believe they can exercise pricing power.

Download the report to learn:

  • The average EBIT (earnings before interest and taxes) margin of industries that demonstrate pricing power – that is, those with high and stable margins in H2 2021 – was about 16%, with a low standard deviation of 0.2%.
  • Industry concentration indicates pricing power: the fewer the companies, the greater their ability to raise prices.
  • The equity price gains of these industries outpaced their pre-Covid long-term averages by about 35ppts in Q4 2021 (annualized) as investors recognized their superior pricing power.

Back to Resource Hub

Related services

Europe

Post

Eurozone: Post-invasion reality: higher inflation, higher uncertainty

Survey data this week offer a glimpse into the European economy's post-invasion reality. The Economic Sentiment Index (ESI) reading for the eurozone fell to a 12-month low, driven by dips in consumer confidence and industrial sector sentiment. Moreover, the final manufacturing PMI published today confirmed that the tailwinds coming from the removal of Covid restrictions will be met by extremely strong gusts coming from the war. The headwinds from the conflict are expected to last through 2022, impacting the recovery in industrial activity.

Find Out More
industry

Service

Global Industry Service

Gain insights into the impact of economic developments on industrial sectors.

Find Out More
real estate building

Service

Real Estate Forecasts and Scenarios

Track, analyse, and react to macro events and future trends for the European region.

Find Out More