The promotional products industry certainly hasn’t been immune to inflation and its lingering effects.

As in so many other industries, promotional merchandise businesses were affected by increases in the costs of certain raw materials. In many cases, promo companies were pushed to sell products at a higher price because of what they were paying for nearly everything that went into their business –  labor, raw materials, utilities and transportation of goods.

“In navigating inflation, the promotional products industry has demonstrated remarkable balance; consumers are finding greater value, distributors are adapting with strategic foresight, and suppliers are optimizing amidst challenges,” says Alok Bhat, market economist and research lead at PPAI. “This synergy of efforts is driving the industry forward, proving its resilience and potential for growth in a fluctuating economic landscape.”

The Cost Of Promo In 2009

If you’ve been to the grocery store, movie theater, car dealership or on Zillow lately, you know that everything costs more (except for, thankfully, Costco’s $1.50 hot dog and soda combo).

Promo products are no exception. Let’s take a look at the prices of some industry staples from 15 years ago, according to a 2009 end-user catalog from SAGE.

  • Bumper sticker magnets cost $2.10 per item for a minimum order of 125. In 2024, a comparable bumper sticker magnet can go for somewhere between $3.29 and $5.54 per item for a minimum order of 125.
  • Non-woven tote bags cost $2.11 per item for a minimum order of 300. In 2024, a comparable non-woven tote bag can go for somewhere between $2.19 and $4.06 per item for a minimum order of 150.
  • Ceramic coffee mugs with one-color imprint cost $2.04 per item for a minimum order of 72. In 2024, a comparable coffee mug can go for somewhere between $4.75 and $6.40 per item for a minimum order of 72.
  • Wristbands cost $2.80 per item for a minimum order of 125. In 2024, a comparable wristband can go for somewhere between $3.18 and $4.24 for a minimum order of 100.
  • The Virgo pen cost $2.49 per item for a minimum order of 100. In 2024, a comparable Virgo pen costs $3.20 per item for a minimum order of 100.
  • Notebooks cost $3.41 per item for a minimum order of 500. In 2024, a comparable notebook can go for somewhere between $4.15 and $5 for a minimum order of 100.

 Measuring Inflation

The U.S. Department of Labor defines inflation as the general upward price movement of goods and services in an economy over a specific time.

  • For example, the value of a dollar in 2009 is equivalent to $1.44 today.
  • This means that today’s prices are 1.44 times as high as average prices were 15 years ago, according to the CPI Inflation Calculator.
  • In other words, today’s dollar buys only 69.444% of what it could buy back then.

The prices that promotional products businesses are paying today reflect the fundamental economic principle of supply and demand: If there isn’t enough supply to meet the demand, the price goes up. When consumers have more money to spend, such as when travel and recreational activities were virtually non-existent during the pandemic, their interest will drive up the cost of the limited options on the market.

Supply shocks – major disruptions in the supply chain – also cause inflation. The most recent example of a supply shock has been the Red Sea crisis, in which attacks from Yemen’s Houthi rebels have forced many container shipping lines and tanker owners to reroute around the Cape of Good Hope, adding an additional two weeks to the supply chain and reducing global container capacity. 

Inflation in the U.S. is measured by three indexes:

  • The Consumer Price Index (CPI), published by the Bureau of Labor Statistics, is a measure of the average change over time in the prices paid by consumers for a basket of goods and services.
  • The Producer Price Index (PPI), also published by the Bureau of Labor Statistics, tracks the average change in prices that domestic producers charge and manufacturers pay to make consumer goods.
  • The Personal Consumption Expenditures Price Index (PCE), published by the Bureau of Economic Analysis, is similar to the CPI, except that it covers more of the U.S. economy.

Inflation’s Impact On Promo

While 2023 was another record-breaking year for the industry, its growth rate of 2.24% failed to outpace inflation, which hasn’t dipped below 3% since March 2021, according to the Consumer Price Index.

  • It’s a significant step back from 2022’s growth rate of 15.6% and 2021’s growth rate of 12.5%.
  • Growth has slowed, but it’s worth noting that those two years were part of a recovery from the 2020’s revenue totals, which was an outlier year due to the effects of the COVID-19 pandemic on the market.

While the promo industry is growing in terms of absolute numbers, Bhat explains that its real growth – growth adjusted for inflation – is negative. “In other words, the value of the industry’s output hasn’t increased as much as the general price level in the economy,” Bhat says. “This situation implies that the purchasing power of the industry’s revenue is decreasing; it can buy less than before in terms of goods and services.”

The Federal Open Markets Committee (FOMC), a branch of the Federal Reserve that’s responsible for open market operations, seeks to achieve an inflation rate around 2% for optimal employment and price stability.

In order to reduce inflation, the Federal Reserve has increased its federal funds target rate, which has remained at 5.25% to 5.5% since the summer.

  • The rate sets a benchmark for other interest rates, such as credit cards, mortgages and auto loans.
  • Between March 2022 and July 2023, the Fed hiked its benchmark rate 11 times.

Higher interest rates make borrowing money more expensive and help reduce consumption by cooling off demand. Certain promo clients, like those in the real estate and technology industries, could be greatly affected by rising interest rates, reducing their marketing spend as a result.

  • Most economists anticipate the Fed to cut rates later this year rather than March or May as initially predicted, according to CBS News.