This article explores what Q4 2017 Middle Market Indicator data revealed about executives’ cost concerns and the fear of inflation.

The hula dance the stock market has been performing over the last several weeks may be caused by fear of inflation. Inflation hurts companies’ profit margins and it can also drive interest rates up, triggering more saving and less investing.

Whether the fears about inflation will pan out remains to be seen. But what we do know is that middle market executives were privy to the possibility well before stock prices reflected the issue.

The Center’s Q4 2017 Middle Market Indicator, which reflects the views of 1,000 middle market leaders as of mid-December 2017, points to executives’ growing concerns over costs.

Specifically, the data show:

More companies say costs are a challenge.

Since the close of 2016, the number of middle market executives citing costs as a key challenge impacting business growth grew by a third. In Q4 2017, close to a quarter (22%) of mid-market businesses leaders listed costs a top concern. As companies see everything from oil prices, to interest rates, to wages going up, they are giving more attention to what it costs to do business and they are increasingly conscious about keeping their costs under control.

About half of companies intend to raise prices.

Throughout most of 2017, the majority of middle market companies indicated that they would keep prices the same in the coming year, or perhaps drop them a bit. That ratio changed at the end of the year, and the number of businesses saying they plan to increase prices rose to 48%. As cost concerns escalate, more companies are willing to consider upping the price of their products and services to help compensate for their increased expenses.

For now, profit margins are safe.

While middle market companies may be looking more closely at costs and prices, for the most part, they feel the situation is under control. In other words, leaders believe they will be able to recoup the increases in costs through their profit margins.

Get the pulse of the economy.

As the segment that drives job creation and growth for the nation, the middle market gives critical insight into the state of the overall economy. Beyond inflation concerns, the performance of middle market companies and the perceptions of its leaders can give an accurate forecast of things to come in terms of economic health, job growth, and future investment appetites. To stay in tune with everything that’s happening in the middle market, subscribe to receive our quarterly Middle Market Indicator report right in your inbox using the subscribe form at the bottom of our homepage.

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