Omicron variant could push tire pressures “well into next year”

Photography: Shutterstock

Federal Reserve Chairman Jerome Powell had no reassuring words about the state of inflation on Tuesday.

Powell told the US Senate Banking Committee that inflation could persist “well into the next year” as wage rates continue to rise and people choose not to return to work for fear the continuation of the pandemic.

“It now looks like the factors pushing inflation up will persist into the next year,” he said. “In addition, with the rapid improvement in the labor market, underutilization is decreasing and wages are increasing at a steady rate. “

This was a change from previous forecasts that inflation would subside rapidly as the pandemic improved and people returned to work. The testimony wreaked havoc on Wall Street, causing stocks to plummet again. Investors have been particularly tough on restaurants. The median restaurant stock fell 2%, and almost all businesses ended the day lower.

Some companies have been particularly affected. Sweetgreen, which has had a few days of roller coasters, was down 8.5% on Tuesday. Carrols Restaurant Group, the large Burger King franchisee which has seen its stock plummet this year, has closed more than 5%. Krispy Kreme and Jack in the Box both closed over 4%.

The larger stock indices were all down. The S&P 500 Index closed down 1.9% on Tuesday.

Stocks have been particularly volatile since Friday, when growing concerns over the omicron variant of the coronavirus raised fears of a prolonged pandemic. This concern intensified on Tuesday, after Stéphane Bancel, CEO of the pharmaceutical company Moderna, told the Financial Times vaccines would struggle with the new variant.

The comments added to fears that the variant will bypass vaccines and send even more cases, which could lead to more restrictions and other efforts that would in turn hurt the economy.

Powell said the new variant could extend the return to work until next year, which would intensify many of the supply chain disruptions that have plagued much of the economy.

“The recent increase in COVID-19 cases and the emergence of the omicron variant present downside risks to jobs and economic activity and increased uncertainty for inflation,” said Powell. “Greater concerns about the virus could reduce people’s willingness to work in person, slowing progress in the job market and intensifying supply chain disruptions.”

Workforce challenges have been the biggest issue for the restaurant industry this year. Despite an impressive recovery in sales, operators say the environment poses significant challenges as they struggle to recruit and retain enough workers to meet demand.

Restaurants have drastically increased wages, often by 10% or more, to attract people. They also raise prices to pay for these wages. But operators are also struggling to source enough product largely due to a lack of engines for distribution companies or a lack of workers at processing plants and other suppliers.

Rising costs have raised fears on Wall Street that restaurant profit margins are shrinking even as their sales take off.

Many restaurant companies are now near their 52-week lows and a few new lows set on Tuesday, including BJ’s Restaurants, Cracker Barrel, Brinker International, Jack in the Box, El Pollo Loco, Red Robin, Del Taco and Carrols.

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive perks, including unlimited access to all of our content. Register here.

Source link

About Francis Harris

Check Also

Downtown McKinney hosts homecoming event for Kentucky tornado survivors

A percentage of December 29 sales from select businesses in downtown McKinney will be used …