McKinsey&Company
Our playbook for managing inflation
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Up, up, and away. Energy and food costs are skyrocketing, supply chains are constrained, and consumer demand is strong. The upshot? US inflation rocketed to a forty-year high of 8.5% in March from the same month a year prior. Though economists see some encouraging signs that inflation may be peaking, such as a slowing rise in the core price index, the Russian invasion of Ukraine and China’s COVID-19 surge may mean that supply disruptions—and resulting higher prices—endure longer. [WSJ] |
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Global flare-up. The world is experiencing a synchronized inflation outbreak that previously seemed isolated to the US and some European countries. Producer prices are rising in Japan, India, and South Korea, and all economies are feeling the effects of higher energy and food prices. As the worst of the COVID-19 pandemic subsided, the global economy began to rebound, but Russia’s invasion of Ukraine has slowed this recovery and created new sources of inflation. [Bloomberg] |
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‘Motivator in chief.’ Few CEOs have led a company through today’s historic spikes in inflation. Six out of ten advanced economies are now grappling with year-on-year inflation above 5%, though their central banks and planners have long expected to deal with approximately 2% inflation. Chief executives play a key role in setting direction, aligning the organization, and serving as “motivator in chief,” McKinsey research reveals. Our inflation playbook arises from work with hundreds of companies and should help CEOs no matter what direction inflation takes. |
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The CEO inflation playbook. The CEO’s focus cannot be limited to inflation’s implications for profitability. Instead, these leaders need to ask how companies can create value for customers with targeted products and services, how to redesign supply chains, what can be done to attract and support talent—including procurement leaders—and what repricing to pursue. See our playbook for managing inflation and learn how CEOs can set priorities and organize to direct all this activity. |
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| — Edited by Katy McLaughlin |
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