(The Center Square) – Inflation has hit some Montana businesses hard, and others have felt less of an effect, something state economic development experts say depends on their business sector.
“Some businesses are being horribly impacted by inflation. And others depending on how they’re balanced and what their product is it hasn’t been that big a deal,” Brian Obert, executive director of Montana Business Assistance Connection, told The Center Square. “So it really does depend on which sector you’re in right now on how badly you’re impacted.”
The impact in Montana aligns with other states in that businesses which offer a good or service that consumers consider a discretionary expenditure, or a non-essential good or service, feel the most impact, Bridger Mahlum, government relations director for the Montana Chamber of Commerce, told The Center Square.
“Those businesses are probably feeling the squeeze the most just because when they have to pass on inflation in the form of higher prices for something that a consumer might not think is the most important thing to them at this time, they might pass on it,” he said.
Obert, who heads an economic development agency based in Helena that serves a three-county region, monitors some restaurants in the region.
“They’re seeing availability being more of an issue than the price point. And the good restaurants are understanding what to buy and when to buy it to try to mitigate increases in their costs,” he said. “Now, if you’re a trucking firm, you’re a trucking firm and there’s no way to get around that.”
Anything that has anything to do with fuel costs is getting hit by inflation.
The state’s entire construction industry from a logistics standpoint, getting windows, doors and molding delivered has been impacted substantially, Obert said.
“We’re trying to catch up, which is difficult to do in the time when you’re seeing an increase in interest rates and an increase in the cost of goods and really making it difficult for a construction site,” he said.
On top of that, much of the state has unemployment below 2%, he said.
“Inflation costs just associated with more workers is kind of burning people up pretty badly also,” Obert said.
If inflation continues to have a large impact in Montana, Mahlum said small businesses in the tourism industry might feel some of the squeeze. People might put off vacations because the price to get to Montana might be too high compared to other priorities like groceries that also have inflated prices.
“Does that outweigh for them what might be increased costs due to inflation of being able to actually do that vacation?” he asked.
To offset any price hikes, Obert said businesses must get innovative. His association is telling business owners to automate any activities possible, whether that’s better computer systems or full-blown automation for packaging or anything else.
Passing on costs to customers could cost businesses some customers, Mahlum noted, adding that they can operate on a thinner margin, which could irritate investors.
“Do they decide to change vendors for the products that they’re building or selling? Do they cut costs on the inputs to create the products that they sell so they run into some quality issues there?” he asked.
One solution could be to offset the price by bundling goods or services to offer a more competitive price. A business that’s been operating for a longer time with customer support might be able to raise the product’s price in conjunction with emphasizing their brand as a higher tier offering in that industry, Mahlum said.