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April 21, 2024

High inflation is causing Virginia businesses to struggle

After facing economic hardships from pandemic-era restrictions and struggling to find workers because of the subsequent labor shortage, Virginia businesses are now facing another problem – inflation.

Inflation rates have risen in recent months, surging to 4.2% in July and up to 6.2% in October. Inflation is an increase in prices for goods and services and a reduced value in the country’s money, which means every dollar is progressively worth less than it was the previous month. High inflation is caused by a variety of factors, including supply shortages, high government spending and the Federal Reserve increasing the money supply.

Current inflation rates are the highest they’ve been since the 1990s, which is causing businesses and consumers to make tough decisions on how they will spend their money amid soaring prices.

Tony Stafford, the founder of the local northern Virginia chain, Ford’s Fish Shack, told The Center Square that everyday items he never had issues with acquiring are taking between two and three weeks to be delivered.

“Everything from to-go boxes to canned chili sauce are consistently out of stock,” Stafford said. “I used to use 3-4 vendors; now I have to use 6-8 to make sure I can find the items needed to run my restaurant. The prices of those items keep increasing to the point that I cannot use a paper menu, because prices change on a daily basis. It continues to be a challenge and doesn’t seem to be getting any better for my restaurants.”

Robert Melvin, the director of government affairs at the Virginia Restaurant, Lodging & Travel Association, told The Center Square these problems are causing a lot of problems for the businesses he represents.

“Our people are seeing monumental increases on things,” Melvin said. “…Our folks are really taking a hit.”

Melvin said the cost of food items have gone up across the board, including the cost of chicken wings and crab meat. Hotels are struggling to obtain essential materials to the point at which he said one of his members had to purchase whatever they could find at Costco because they could not get bed linens or towels from vendors. The labor shortage is also causing some restaurants to reduce their number of operating days and forcing hotels to reduce the number of rooms they can rent because there aren’t enough workers to clean all of the rooms if they were all open.

Nicole Riley, the Virginia director for the National Federation of Independent Business, reported similar problems among her members. The NFIB is the largest small business association in the country.

Riley told The Center Square businesses have to decide how to absorb the higher costs of goods, whether they pass it onto the customer or deal with it internally by forgoing pay raises for employees. The former could discourage customers from coming, but the latter could make it difficult to hire workers, especially during a labor shortage, she said.

“They’re just in a really tough spot right now,” Riley said.

Melvin and Riley both indicated the state should not put additional mandates or taxes on businesses at this time, and both encouraged the state to offer relief to businesses. Melvin encouraged state officials to rein back local meals tax hikes and Riley encouraged ending the grocery tax, lowering taxes and returning the state’s surplus to the people and businesses through tax relief.

Stephen Haner, a senior fellow for state and local tax policy at the free-market Thomas Jefferson Institute, told The Center Square that the state needs to steer away from any regulations or taxes that would put a burden on businesses.

“It took a while for inflation to build, and it will be a slow process bringing it under control,” Haner said. “The Federal Reserve and other central banks will need to lead the fight. About the only thing the state can do is ‘do no harm’ by piling on higher taxes, fees or find other ways to pull dollars out of people’s pockets like new regulations. Where resources like energy can be expanded, they should be.”

This article was originally posted on High inflation is causing Virginia businesses to struggle

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