Can't chase inflation... Hmmm

Geuze

Here are some of the sectors seeing large increases in profit:

Geuze

During 2022, two-thirds of the price inflation was due to rising profits:

https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230627~b8694e47c8.en.html

Speech by Christine Lagarde

The inflation shock

The euro area economy has faced a series of overlapping inflationary shocks since the end of the pandemic.[1] Since the beginning of 2022, these shocks have both raised the price level by 11% and led to us transferring more than €200 billion to the rest of the world in the form of a terms of trade tax.[2]

In an environment such as this, the natural reaction of every economic agent is to try to pass on these price increases to other actors in the economy. In the euro area, we can identify two distinct phases in this process.

The first phase was led by firms, which reacted to steeply rising input costs by defending their margins and passing on the cost increases to consumers.

The intensity of this reaction was unusual. During previous terms-of-trade shocks in the euro area, firms had tended to absorb rising costs in profit margins, as slower growth made consumers less willing to tolerate price hikes.[3] But the special conditions we experienced last year turned this regularity on its head.

The sheer scale of input cost growth made it harder for consumers to judge whether price hikes were caused by higher costs or higher profits, fuelling a faster and stronger pass-through. At the same time, pent-up demand in reopening sectors, excess savings, expansionary policies and supply restrictions brought on by bottlenecks gave firms more scope to test consumer demand with higher prices.

For this reason, unit profits contributed around two-thirds to domestic inflation[4] in 2022, whereas in the previous 20 years their average contribution had been around one-third.[5] This in turn led to the shocks feeding into inflation much more quickly and forcefully than in the past.

This first phase is however now starting to wane.

Largely thanks to lower energy prices, year-on-year producer price inflation has already dropped by 42 percentage points from its peak last summer. And while this is taking time to feed through to prices more generally, it is partly being reflected in a broad-based decline in headline inflation and a levelling off in some measures of underlying inflation – especially exclusion-based measures and those that capture the persistent effects of energy on economy-wide prices.

At the same time, high inflation has eaten into domestic demand, which contracted by 2% over the last two quarters[6], and the consumption impulse created by excess savings is fading.[7] The early effects of our policy tightening are also becoming visible, especially in sectors like manufacturing and construction that are more sensitive to interest rate changes.

Faced with this combination – falling input costs and dwindling demand – we saw unit profit growth slow markedly in most sectors in the first quarter of this year.

Geuze

See the huge growth in profits in Ireland during 2022:

Geuze

https://www.boards.ie/discussion/comment/120871049#Comment_120871049

I don't know what you mean by "price gouging".

I am simply stating that in many sectors, profit margins have widened since COVID ended, during the last 18 months.

Firms have passed on price increases greater than their costs have risen.

One example: Dalata are making a 25% net profit margin (not gross, net!!)

zg3409

https://www.boards.ie/discussion/comment/120794437#Comment_120794437

Re 48 mobile network, used to be called 48 months and was in theory only open to those aged 18 and for the 4 following years, hence 48 months. It was rebranded 48 later.

In terms of monthly and 13 weeks they rolled back that price increase, so it's the same price as it was before. The sneaky thing is if you never use your phone they get monthly money from you while if it was credit you might get 2 months out of it.

salonfire

https://www.boards.ie/discussion/comment/120871097#Comment_120871097

If your business has been shut down for two years and you make a larger than normal profit the 3rd year, could you say that the business is really up money?

Also, everyone else's incomes have risen lately, why shouldn't a business and their shareholders see their income rise? They suffer the same loss of purchasing power as everyone else has.

You think your income should raise but a business and their shareholder's should not?

blanch152

https://www.boards.ie/discussion/comment/120870610#Comment_120870610

And that is wrong, and bad for society.