Jump in business costs hits profits

The cost of doing business is rising much faster than the prices paid by
consumers, squeezing companies’ profit margins, according to a new business
price index, the Financial Times reported.

The new index from Fathom
Financial Consulting
uses a wide range of published official figures and
financial market data, the FT said. It says companies’ costs rose at an annual
rate of 6.1% in the fourth quarter of last year, while consumer prices went up
by 3.9 per cent.

The 2.2% point gap between business and consumer price inflation represents a
squeeze on corporate profits from business costs which are difficult to pass on,
according to the FT.

In normal times, Fathom’s estimate of business price inflation (BPI) and the
official CPI are little different, but the fixed cost of financing many
companies has risen during the credit crisis, while the ability to force
consumers to pay for those additional costs is limited by the speed of the
downturn, the FT added.

Read the full story:

business costs outstrip profits

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