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Corporate profits account for almost half the increase in Europe’s inflation

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Re: Corporate profits account for almost half the increase in Europe’s inflation

#41

Post by thermalsauce »

monero-xmr wrote: post #18

Ah yes ignore the money printing, certainly all of this inflation is the private sector! Where are the price caps?!?

Right, how does it make sense to blame the private sector for rapid inflation when it's the government and central banks that control the minting of currency?

I get that corporations are evil and greedy, but inflation is not something corporations have influence over. If anything, we should be looking at banks, yet even banks count on the central bank to print them fresh bills.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#42

Post by pbhjpbhj »

koboll wrote: post #16
smt88 wrote: post #7

Earlier quoted context omitted.

This kind of reply is uninteresting and unhelpful. These statements about inflation drivers are surprising (to some) and highly relevant because they counter corporate and conservative propaganda. We now know that government assistance isn't the main villain in the brutal inflation spikes of the last few years, and we need voters to understand that too.

"corporate and conservative propaganda" Most center-left economists are pretty dismissive of the idea that inflation is a corporate-profits-driven phenomenon too.

What do you say that those left of centre are blaming inflation on then?

Re: Corporate profits account for almost half the increase in Europe’s inflation

#43

Post by zozbot234 »

rgbrenner wrote: post #33

I think this talk about costs vs profits sounds important to lay people, but is completely irrelevant. Companies do not price goods based on the goodness of their hearts. They price it at the point that maximizes volume*(unit price-COGS). Companies are constantly testing this price point. For example, a promotion may produce data that can indicate how consumers will respond to a price change. In an inflationary perio…

> And this permits companies to increase prices, and produce higher profits.

It's worth noting that this mostly reflects short-term pricing power. It takes a lot of time for new competitors to enter any industry. So we should expect these price increases to occur rarely and be somewhat time-limited as competition ultimately reestablishes itself.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#44

Post by m-ee »

toomuchtodo wrote: post #20
QuarterReptile wrote: post #17

Earlier quoted context omitted.

Why were corporations settling for such comparatively low profits before 2022?

Because they didn't know the pricing power they had. The macro gave them cover to stretch and see what would happen.

A lot of economics seems to me like the “perfectly spherical cow in a vacuum” jokes you hear about physics. There’s no concept of friction or activation energy. “The market” simply adjusts in real time without human interaction.

In the real world someone needs to pitch a price increase. There’s risk that sales and profits might drop. That’s bad for the company and that persons career. When everyone else is raising prices and your costs are going up then that risk:reward ratio looks different.

My company was seeing increased material costs, they raised prices to cover that and then some. Sales are down but profits went up slightly. I was in the meetings where this was discussed yet people will tell me it doesn’t happen.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#45

Post by the_gastropod »

bedobi wrote: post #35
monero-xmr wrote: post #18

Ah yes ignore the money printing, certainly all of this inflation is the private sector! Where are the price caps?!?

how do you explain the fact that gazillions were printed for decades without much meaningful inflation? japan being the printiest of them all having had the least inflation of all crickets huh

As a rule of thumb, it's safe to assume anyone who complains generically about "money printing" doesn't actually have a rational point. They're generally hand-waving broadly, suggesting some John Birch Society type of inflation conspiracy.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#46

Post by JustBreath »

pessimizer wrote: post #26

Danone, Kellogg among 75 companies France has asked for price cuts https://www.reuters.com/business/retail-consumer/danone-kell... ----- Meanwhile, in the US: Car Dealer Markups Helped Drive Inflation, Study Finds: The money dealers charged over makers’ suggested prices factored into a nearly 16% rise in the consumer-price index in recent years https://www.wsj.com/articles/car-dealer-markups-helped-drive...

I thought auto sales was a result of the downward/upward demand wave the pandemic drove?

Basically fewer people bought cars, then lots more people bought cars and meanwhile there was a shortage of chips.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#47

Post by smilekzs »

pessimizer wrote: post #26

Danone, Kellogg among 75 companies France has asked for price cuts https://www.reuters.com/business/retail-consumer/danone-kell... ----- Meanwhile, in the US: Car Dealer Markups Helped Drive Inflation, Study Finds: The money dealers charged over makers’ suggested prices factored into a nearly 16% rise in the consumer-price index in recent years https://www.wsj.com/articles/car-dealer-markups-helped-drive...

I wish this entire Stealerships industry just vanishes and this reason (crazy ADMs) alone is enough. There is enough tacit collusion in the industry that makes it unnecessarily difficult to get around being ripped off.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#48

Post by rakoo »

starbugs wrote: post #13

TLDR: * Profits: 45 percent * Import costs: 40 percent * Labour costs: 25 percent Somehow obviously arriving at 110%? "As the Chart of the Week shows, the higher inflation so far mainly reflects higher profits and import prices, with profits accounting for 45 percent of price rises since the start of 2022." "Import costs accounted for about 40 percent of inflation, while labor costs accounted for 25 percent. Taxes ha…

Gentle reminder that "labour costs" are, in fact, what allows you and a large majority of humans to live ie wages. Framing it as such is really non neutral and perpetuates the idea that companies should come first.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#49

Post by zitterbewegung »

seizethecheese wrote: post #34

This is a write up of a working paper, not published yet. Here’s the link to the actual paper: https://www.imf.org/en/Publications/WP/Issues/2023/06/23/Eur... Here’s the abstract: > We document the importance of import prices and domestic profits as a counterpart to the recent increase in euro area inflation. Through a novel consumption deflator decomposition, we show that import prices account for 40 percent of the…

A better thing to keep in mind is if your economy is in a wage inflation cycle where companies are increasing the amount of money to pay out to employees because their costs are increasing which makes inflation goes higher and higher. It wouldn’t be as companies are just hiking prices but, YMMV. I also don’t want to say that corporate profits are something to desired for and that the outcome that the paper outlines isn’t good or bad.

Re: Corporate profits account for almost half the increase in Europe’s inflation

#50

Post by dauertewigkeit »

alexaholic wrote: post #19

I find it hilarious when companies are following their stated goal of making profits, while everybody else is rushing to explaining rising prices by factoring in everything but profits.

Because people expect that in a functioning competitive market, simpily raising prices won't work because your competitors would out bid you.
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