Why Is Inflation So Sticky? It Could Be Corporate Profits

[BeckyDem]

By Paul HannonFollow
May 2, 2023 5:53 am ET


Some companies might have been raising prices faster than their costs have increased

Inflation has proved more stubborn than central banks bargained for when prices started surging two years ago. Now some economists think they know why: Businesses are using a rare opportunity to boost their profit margins.

Figures released Tuesday by the European Union’s statistics agency showed consumer prices in the eurozone were 7.0% higher than a year earlier in April, a pickup from March and more than three times the European Central Bank’s target. However, the core rate of inflation—which excludes food and energy prices—edged down to 5.6% in April from a record high of 5.7% in March.

Inflation rates also remain uncomfortably high in the U.S. and many other parts of the world despite interest-rate rises that have gone further and been delivered more quickly than at any time since the 1980s.

Excerpt:
According to economists at the ECB, businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were.
https://www.wsj.com/articles/why-is-inflation-so-sticky-it-could-be-corporate-profits-b78d90b7


( What a shock, huh? )

[walkingman]

1. I agree - I think it is corporate profits.

When I say that, most people I know do not agree. I think the last couple of years most businesses, large and small, have used the pandemic to raise prices, shrink the size of their products and keep the same price or use the small raises they have been forced to raise as an excuse. When I suggest a "windfall profit tax" it is like I am being anti-American. We seem to love corporations and find excuses for everything corporate related.

The inflation of the last two years is not because we have "excess cash" because the government gave people relief during the pandemic it is because companies used it as an excuse to raise their prices and feel justified in doing so.

I am no economist but it's what I believe.

Fight the Power!!

[Shermann]

2. Well the average wage index for 2022 was almost 9%

2023 appears to be more of the same so far. That's a big component of consumer price inflation.

[2naSalit]

3. It IS corporate profits.

[LetsGetSmartAboutIt]

4. Egg companies have shown this as well

Eggs are controlled mostly by 5 companies, one of them had profits up 500% over the same quarter in the previous year.

( Found CNN link, I under reported the percentage )[link:https://www.cnn.com/2023/03/29/business/egg-profits-cal-maine/index.html|

Their financial report also said they were not effected at all by the avian flu which is another reason given for price increases.

"You mean we can just raise our prices to make more profit?"
"Yes"
"Do that as much as you can get away with, now. We like money."
( Nod to Idiocracy there )

Windfall profits tax ?
Won't happen but it should, and then it should be given back to all middle class taxpayers as a credit.

It's legal in a capitalistic economic system to charge as much as the market will bear.

But at some point you are selling bullet proof vests to people at gun point since that extracts the most based on market sentiment.

[BeckyDem]

5. Thank you for that!