President Biden’s recent speech regarding inflation and the economy pointed to the Russian invasion of Ukraine as one of the primary drivers of inflation; and in similar fashion, many American businesses are also pointing to the war in Ukraine as more and more feel the effects on their business operations.
Between April 1 and May 6, mentions of either “Russia” or “Ukraine” in earnings releases increased 141% compared to the previous quarter. That’s according to new data from Cision, a communications platform for PR professionals, which analyzed almost 1,400 earnings announcements published on PR Newswire. In all, “Russia” or “Ukraine” were mentioned 270 times among those announcements, along with others, such as “COVID,” “pandemic,” “supply chain,” “interest rate,” and “inflation.”
The numerous crises of the past two years can feel as though they’ve merged into one big blur, with the pandemic as the progenitor; but while the pandemic did snarl supply chains, and more or less bring on the high rates of inflation and subsequent interest rate increases we’re currently seeing, Russia’s invasion of Ukraine is something of an outlier. Though it is still clearly impacting businesses’ bottom lines.
That’s happening for a couple of different reasons. Some companies are ceasing operations in Russia, causing them to lose business—Netflix, for instance, said it lost 700,000 accounts in Russia after pulling out of the country in its latest earnings report. Others are contending with a loss of resources or services from Russia or Ukraine due to sanctions or the war itself. Russia has been supplying around 10% of the world’s petroleum production, for example, and it’s not easy to replace that overnight for businesses depending on it.
However, the war’s effect on American businesses may not come as much of a surprise to analysts. In March, a J.P. Morgan research analysis warned that “Russia’s invasion of Ukraine will slow global growth and raise inflation,” and also noted that U.S. companies have several “indirect risks” related to the conflict that could stymie business, such as further supply-chain problems, higher oil and food prices, and tightening monetary policy—all of which have come to bear.
The resulting struggles have, in some cases, led to disappointing earnings reports from big companies that have contributed to a decline in the stock markets in recent weeks, as the S&P 500 is down 10% over the past month, and almost 18% since the beginning of the year.
It’s worth noting, too, that the terms “pandemic” and “COVID” were still mentioned 917 times in Cision’s analysis, far more than “Ukraine” or “Russia,” and yet that figure was still a decrease of 43% from the previous quarter. So even though the war in Ukraine is causing headaches for businesses, the pandemic, and its lasting effects, are still top of mind for many corporate leaders.
And the war, coupled with rapidly rising prices (the latest CPI numbers, released today, showed inflation still at 8.3% year-over-year) and the Fed’s attempts to get them under control, may be enough to push the economy into a recession.