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Illustration: Aïda Amer/Axios

The four-decade high in inflation is leading companies to look for alternatives to price increases to avoid scaring off customers.

Why it matters: With annualized inflation registering at 7% in December, businesses are turning to a mix of price increases and "shrinkflation" — cutting the amount you get, not the price you pay.

Driving the news: Less than 24 hours before the Consumer Price Index reported its highest reading since 1982, Domino’s Pizza CEO Ritch Allison said the chain plans to reduce the number of chicken wings in its $7.99 deal from 10 to eight.

  • Facing food-cost increases of 8%–10%, Domino’s also plans to eliminate its $7.99 pizza deal for call-in orders, making it online only amid labor shortages.
  • "The company is optimistic these changes will improve franchise profitability through online upsell opportunities and provide labor savings" as orders move online, Cowen stock analyst Andrew Charles wrote Wednesday.

By the numbers: In November and December, companies mentioned "inflation" or "inflationary" pressure in 2,509 corporate transcripts, up from 643 during the same period of 2020, according to financial research firm Sentieo.

  • "Inflation is persisting because of labor shortages," Columbia Business School finance professor Laura Veldkamp tells Axios. "Scarce labor makes labor and goods more expensive, and this will last as long as COVID lasts."
  • Also key: supply chain breakdowns.

Reality check: Sometimes shrinkflation's not enough, and price increases are unavoidable.

  • 52% of U.S. businesses "expect prices of their products to continue rising in 2022," while only 3% expect them to decline, according to an S&P Global Market Intelligence poll released Tuesday.

Go deeper

America's labor shortage is bigger than the pandemic

Data: BLS; Chart: Kavya Beheraj/Axios

The shortage of workers in the U.S. has become a flywheel of doom, messing up our lives and society writ large. And many of the underlying problems that led to this breakdown are bigger than the pandemic.

The big picture: Millions of immigrants, older workers and mothers are missing from the labor force. Those labor shortages create problems like supply chain woes, school closures, and skyrocketing child care costs — and some of those problems further exacerbate the worker shortages.

Nathan Bomey, author of Closer
Jan 14, 2022 - Economy & Business

Even banks can't outrun inflation

Photo: Victor J. Blue/Bloomberg via Getty Images

For the nation’s largest banks, inflation may be too much of a good (for them) thing.

Driving the news: JPMorgan Chase and Citigroup shares fell today — despite delivering solid quarterly revenue and profit — amid concerns that the banks won’t be able to outrun inflation.

Rising mortgage rates could slow house price surge

Chart: Axios Visuals

Mortgage rates have jumped to their highest level since early 2020.

Why it matters: The rising cost of home loans could slow the booming American market for residential real estate.