Richmond Federal Reserve President Thomas Barkin is flagging a split in the US economy that doesn’t get nearly enough attention: companies selling to other companies can still raise prices with relative ease, while those selling directly to consumers are hitting a wall.
Two economies, two pricing realities
Barkin, who has led the Richmond Fed since 2018, pointed to a clear divergence between business-to-business and business-to-consumer pricing power. In B2B markets, firms are finding a favorable environment for pushing through price adjustments. In B2C markets, not so much.
The reason is straightforward. Consumers who have endured years of elevated inflation are pushing back against further price hikes. That exhaustion is translating into real constraints on retailers and consumer-facing brands trying to protect their margins.
Barkin’s observations come from his regular engagement with business leaders across the Richmond Fed’s district, which covers Virginia, Maryland, the Carolinas, most of West Virginia, and the District of Columbia.
Why the split matters for inflation and the Fed
Barkin’s comments suggest the Fed is watching this dynamic closely. Service firms catering to higher-income households may have more room to absorb cost increases, adding another layer to the picture. Wealthier consumers are less price-sensitive, meaning certain segments of the B2C market could still tolerate incremental hikes while mass-market retailers cannot.
External pressures keep the pot simmering
Supply shocks and tariffs continue to exert upward pressure on input costs, giving B2B sellers additional justification for price increases.
Sectors most exposed to this dynamic include industrials, business services, and enterprise software, where pricing power has historically been more durable. On the other side, consumer discretionary and retail face the tightest squeeze, caught between rising input costs and customers who have drawn a line.