Puff Puff Pass the Inflation: Implications for the cannabis industry

With inflation at a 40-year high and the Fed announcing the most aggressive rate hikes in years, inflation and the uncertain economy dominates most conversations. Based on May’s sustained raise in the Consumer Price Index (CPI), consumers don’t expect to get much relief in the near future. However, the cannabis industry is significantly insulated from the rest of the US economy – so how will inflation impact cannabis market growth and consumer behavior?

What Causes Inflation

Professional economists spend entire careers debating the causes of inflation, from changes in production cost (cost-push), to increased demand (demand-pull), to changes in monetary policy. Right now the US economy is experiencing abnormal behavior in all three categories.

Global supply chain interruptions and labor shortages have caused elevated prices for everything from oil to processed chickens. Raw material prices are elevated, and thus the total cost of production is up.

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