Even as inflation bites, corporate profits remain flush

NEW YORK (AP) — What’s immune to high inflation? So far, the profits at big U.S. companies.

Businesses are facing higher gasoline and heating bills, just like consumers, in addition to higher expenses for labor and raw materials. But unlike many middle- and lower-income Americans, they’ve been making more than enough extra income to cover the additional costs.

Big companies have successfully raised prices for their products, from cups of coffee to auto parts to cans of paint, because their customers have kept lining up regardless. The result: record profits at the end of 2021 as revenue rose and a good chunk of each $1 of that revenue made it to the bottom line.

“A lot of the price pressures are just getting passed along” from companies to their customers, said Alex Arnon, associate director of policy analysis at the Penn Wharton Budget Model, a research initiative.

What's uncertain is how much longer the trend may last, before customers sharply cut back on their purchases. A U.S. government report on Thursday will show how much buying consumers did in February after taking higher prices into account. In April, more clues will arrive as companies line up to tell Wall Street how much profit they made during the first three months of 2022.

The last such round of conference calls for CEOs was a rousing success for the companies. With customers itching to spend, and many sitting on savings built up with help from U.S. government stimulus programs, CEOs often pointed to “low elasticities of demand." That’s an economist’s way of saying customers continued to buy even when prices were rising, and it means companies have less incentive to keep prices low.

“The overwhelming message from most companies in this earnings season is still that demand remains strong and continues...