Two fundamental reasons for that:

1. First, well, in theory, companies can increase prices for their products to offset their costs, but only if they have pricing power. Given what we see anecdotally from Peloton, Target, and Walmart – that is not always the case.

2. Secondly and more importantly, even if a company is able to increase prices nominally, they still need to achieve growth in physical units sold (or, just more services). If your volumes are dropping on higher prices, that results in lower leverage of fixed costs and that would eat into margins. In the likely upcoming recession, real volumes would drop.

Historically, Operating Margins contracted substantially during any recession in any country.