When the annual inflation rate jumped to 8.5% this spring, it marked the highest increase since January 1982. But unlike 40 years ago, this time around the record inflation isn’t coupled with soaring interest rates, which averaged over 16% in 1982 (although the Fed has indicated six interest rate increases by year end). It’s also not accompanied by high unemployment. By the end of 1982, unemployment was at nearly 11%, the highest since World War II. In contrast, in March 2022, unemployment was a mere 3.6%. There’s also the issue of timing. The last time inflation neared 8%, it was spiraling downward after peaking in 1980 at 14.8%.

The inflation we’re experiencing now is on an upward trajectory.  

But there’s something else different about inflation this time compared with 40 years ago that seems to temper its threat: It’s being overshadowed by a number of substantial issues and world events—a rebounding economy following the pandemic, Russia’s war on Ukraine, the soaring cost of gasoline, a dearth of ready-to-work employees and supply chain disruptions that affect consumers and businesses struggling to purchase everything from durable goods and products on grocery store shelves to raw materials for manufacturing. 

Those who were in business the last time inflation flirted with double digits—including those interviewed in early April for this story—remember it as a very different situation. “It’s nowhere near as bad now as it was 40 years ago,” says Gene Geiger, MAS, who started working on the manufacturing side of his family’s distributorship, Geiger, in Lewiston, Maine, in 1978. “During the Carter Administration, it was much worse. Business interest rates were up to 18%. Back then you couldn’t get a fixed-price quote on certain materials—you didn’t know the price until it was shipped to you.”

Pricing on finished goods was also a big consideration. “It was a different world then,” remembers Mark Gilman, CAS, chair of the board for Shawnee Mission, Kansas, supplier Gill Studios, Inc., adding that the biggest concern in those days was managing the price increases that came with inflation. Forty years ago, suppliers printed their catalogs in January and prices remained in effect throughout the year. “We were obligated to sell at the prices printed in those catalogs,” he says. “Inflation is easier to manage this time around because we’ve gone digital.”  

To hedge against the 1982 inflation, Gill Studios increased its inventory holdings, even if it didn’t have the orders to support it. “We were making a large investment in raw inventory,” Gilman says. “There were high gas prices. Everybody was concerned we were running out of oil, so prices skyrocketed, and availability shrunk.” In the late ’70s, Gilman implemented an 8% price increase on his product line and says he heard plenty about it from customers. He thinks people are more understanding about price increases today than they were in 1982 because prices are rising across all industries. There’s also much more news coverage, and consumers are more savvy and better informed. Still, inflation is a concern. “Inflation is the kind of thing that can force small businesses into making serious decisions, if it causes more borrowing,” he says. “Small businesses want to remain as liquid as they can.”

With inflation forcing prices up, business was good in those days. “I remember boasting to a fellow supplier that we had done all these trade shows and made all these phone calls and increased our business 25%,” Gilman says. “The supplier said his company didn’t do any of those things and his business went up 25%, too.”

Bob Waldorf, MAS, who opened Idea Man, Inc. in Los Angeles in 1971, was running a booming business when inflation hovered near 8% in 1982. He recalls prices increasing, defense contracts in his community being eliminated and a steep rise in unemployment. It was an uneasy time. “We had to control our costs to the best of our ability. But when prices went up, we were able to increase our profits,” he says. 

Geiger remembers how difficult it was to manage costs. He says his manufacturing business was not threatened with going out of business, but it did have to adapt. “We had to use different materials or invent new products that were smaller and allowed us to cut costs. For example, we would put lower-priced cover materials on our diaries. We’d look at costs and figure out how to adapt our products to keep costs lower, assuming that we couldn’t raise prices.”

Ira Neaman, MAS, opened supplier Vantage Apparel in Avenel, New Jersey, in 1977, and found inflation an advantage in that his young apparel company was competing head-to-head with established, publicly traded companies that had earnings expectations. The fact that Vantage didn’t, leveled the playing field. 

Neaman sees two other big differences in today’s situation compared with 40 years ago. In 1982, almost all industry companies were family owned. Today, about half of the top 40 companies in the industry are owned by private equity, with shareholders and expected rates of return. Second, the inflation rate is today only about 60-70% of what it was in 1980-81. “So it’s not at the same level of inflation. We are still cresting—I don’t think we’ve hit the top yet,” he says. 

He says inflation doesn’t necessarily affect the promo industry because its impact is even across all companies. Instead, he sees interest rates as likely having a greater impact on companies that are borrowing or have expected rates of return. “If interest rates go up, public debt goes up and business and banks are starting to compete for money. The government had 26% debt against the GDP back in 1982, now it’s 138%.

“In 2022, our debt is $30 trillion; COVID added $6 trillion to the debt. The government’s ability to fund debt allows inflation to occur, but it’s offset against the amount of taxation that has to occur. Inflation is the silent taxation. That’s the biggest issue. There could be slashing of social programs, entitlement programs may have to be cut or redistributed, etc. We’ve played kick the can for a long time and, at some point, that can is like 50 pounds of paint—you just can’t kick it anymore. The next couple of years are going to look much different than 1980-81.” 

Despite the headlines about inflation, business owners interviewed for this story agreed that today’s unreliable supply chain is by far the bigger issue. “Disruption and changing prices on customers, or having to explain things to customers who are new, makes life more difficult and increases the distrust between buyer and seller,” Geiger says. “You desire to have things go predictably and smoothly, and when they don’t, it causes stress, tension and distrust.” 

Neaman adds that supply chain issues put a lot of pressure on costs. “Raw materials, any type of dislocation, pushes time and freight, and gas prices become a big concern. Polyester is a big component because it’s oil-based and everybody is dealing with the same elements. I think the big difference is business vs. consumer, and family-run business vs. private equity.” 

For Waldorf, the impact of today’s inflation compared with 40 years ago is very different. “The supply chain issue is helping clients understand that we need alternative sources, and sometimes those are more expensive. Clients are happy just to get delivery.” He believes suppliers and distributors are going to have to deal with the supply chain disruptions for the near future, but says clients understand because they are having the same problem in their own businesses.

Despite the U.S. dollar growing weaker since last year, the supply chain remains top of mind for most business owners. “There is inflation but, to date, suppliers have been careful to keep things in line,” Geiger says. “We know it’s going to be more and more difficult. We know there’s a likely upward inflationary push for all kinds of reasons. Today, it’s getting the supplier to produce and ship what you thought you wanted to buy from them.” 

He adds, “Anyone who is in business knows there are supply chain issues, and if you are not flexible or understanding, then you are playing a game. It is life today and it is not going to change drastically. China is a COVID mess, Shanghai is in lockdown, ports are locked up, everyone is scrambling to make their product in other countries and raw material costs are going up. On the other hand, some companies are taking advantage of it, and they are getting price increases beyond what their costs are. Whenever there is uncertainty, companies can take advantage to make extra profit.”

The delivery time to receive needed boxes for production is another issue straining Tom Riordan’s business at supplier Maple Ridge Farms. “We buy a lot of set-up boxes made in Wisconsin. It used to take us a month to get delivery, now it takes four months. We used to get corrugated boxes in a week, now it’s four weeks.” 

He’s also concerned about a related issue: employee wages. Riordan hires 200-250 seasonal workers every fall to produce the gourmet food gifts his company sells. He had to raise his walk-in wage by 30% last year to attract enough workers. In addition, his cost of goods has increased by 15-18%. 

But despite the challenges, business owners are overwhelmingly optimistic about growing sales during this time. “Demand isn’t slowing down for what most businesses are selling,” says Proforma founder Greg Muzzillo. “Their selling price is going up, and if their margin is staying the same, that means their markets are increasing substantially. So they have more money to spend. No one wants to talk about it, but inflation can be good for many businesses. It’s not good for the consumer, but for business owners and salespeople who are commission-based—it couldn’t be better.”

The numbers prove this out: In 2021, pre-tax corporate profits rose to $2.81 trillion, a 25% increase easily eclipsing the 7% rise in consumer prices in the same period, according to data from Axios. 

Aside from the data points, comparing 1982’s inflation rate to today’s doesn’t reveal many similarities because too many other variables have changed. Four decades ago, distributors received orders from customers by mail and took several days to turn them around before sending the order to a supplier and waiting weeks for the product to be produced and delivered to the customer. “The pulse of business today is totally different,” says Geiger, whose company has been in business for 144 years. “Businesses are smart and adaptable, and no matter what happens, we have to adapt.”

Geiger says that right now business is very strong, and his first-quarter sales were better than he’s seen in two years. “Ours is a very durable business, and what we are doing is of great value. So unlike so many other types of media where ads come and go, ours persists. It has a genuine value. I think no matter what, our industry survives. It may suffer some ups and downs, but it will persist.” 

Even though Geiger is enjoying strong sales now, he recognizes the exhaustive toll the supply chain disruptions are taking on his employees. “It’s not easy to be a salesperson or an employee in a distributorship today, and I’m sure that’s the same with a supplier,” he says.

Neaman also sees a bright future for the medium. “Promotional products are very efficient in terms of what they accomplish,” he says. “They’ve proven on a ROI or cost-per-impression basis to be very effective. It’s non-intrusive. It’s B2B as opposed to B2C. People’s savings can erode, but business investment will still go on. Consumer spend may slow up, but business investment will continue.” 

Riordan thinks that if inflation stops now and levels off, it won’t affect businesses too much. But if it continues, it will affect the industry overall. He’s concerned most with rising interest rates and the possibility of a recession. “But not this year, because demand exceeds supply so much. For the economy to slow down, you’ll need to see a pull back in demand, and I don’t see that out there,” he says.

A recession later this year or early next year is a real possibility—and it could prove to be a much bigger issue than inflation. “If you get into a recession, that’s when everyone pulls in their horns,” Geiger says. “Instead of substituting a product to meet a budget, your budget gets slashed or eliminated.” 

Geiger adds, “The economy to this point has been very buoyant in popping out of the COVID pandemic. But it could turn in three months, six months, next year. Anyone in business is mindful of what can happen, but at the moment we have other fish to fry—secure the goods, deliver them on time and keep customers happy.”  

Major industry companies were started during the hyperinflationary period of the late ’70s and early ’80s.

Despite inflation, or maybe because of it, Tom Riordan saw the late ’70s as an opportune time to get into business and opened supplier Maple Ridge Farms in Mosinee, Wisconsin, in 1978.

At the time, the only thing he was focused on was making sales. “Inflation wasn’t even on our radar,” he says. “But a few years later inflation caused the Fed to raise interest rates to 18% and we felt that.” He was also concerned about the pricing printed in his catalog. In 1984 or 1985, when he sent his catalog to the printer, he remembers that he raised prices 10% across the board and sales were off maybe 20% for the year, but profits were up 10%.

“We never heard much about that across-the-board 10% price increase, but back then prices of everything were going up,” he says.

That same year, Greg Muzzillo also opened his distributorship, Proforma, in Cleveland. He doesn’t recall inflation being a deterrent. “We were growing like a wild week back then—we went from a quarter of a million dollars, to $1 million to $2 million and quickly got to $5 million in those early years,” he says. “I was hustling so hard I didn’t notice inflation.”

When Ira Neaman, MAS, opened supplier Vantage Apparel in Avenel, New Jersey, in 1977, he remembers inflation and interest rates being the two main factors that affected his business. “Inflation was 13.5% and consumer interest rates were 20-21%. Business loans were about 4-5% lower and you worked within those constraints. That was the cost of doing business in those days,” he says. “You had to be efficient. No fluff, no waste. Everybody was accustomed to inflation; everyone was dealing with the same issues. It was expected.”

Tina Berres Filipski is the former editor and director of publications at PPAI.