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Thursday, February 29, 2024

Corporate Earnings Blamed for US Inflation, Not Just Supply Chains, Says Report

Washington D.C. – In a groundbreaking report released today, the dominant narrative attributing persistent inflation in the United States to supply chain disruptions is challenged. The Groundwork Collaborative, a progressive think tank, shifts the focus to corporate profits, asserting they play a pivotal role in the price hikes affecting household budgets.

According to the report, drawing on data from the Bureau of Economic Analysis and National Income and Products Accounts:

  • Corporate profits witnessed a surge in the second and third quarters of 2023, contributing to about 53% of the growth in inflation during that period.
  • In contrast, producer input costs only saw a modest 1% increase over the same period.
  • Consumer prices, however, surged by 3.4%, indicating a significant disparity between what businesses are paying and what consumers are being charged.

Ms. Amelia Jones, an economist at the Groundwork Collaborative and the report’s author, asserts, “The inflation we’re witnessing isn’t primarily driven by external factors like the war in Ukraine or pandemic disruptions. The data unequivocally indicates that corporate profits are playing a much more substantial role than previously acknowledged.”

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The report identifies several contributing factors:

  • Increased market concentration: Larger companies with greater pricing power can raise prices with less concern about losing customers.
  • Stock buybacks: Record profits are utilized for buying back company shares, boosting stock prices and benefiting shareholders without necessarily leading to increased production or lower consumer prices.
  • Wage stagnation: Despite soaring corporate profits, real wages for many workers remain stagnant, curbing consumer spending power and exacerbating inflation effects.

The report’s revelations add fuel to the ongoing debate on inflation and its roots. Progressives and labor unions are likely to leverage this as evidence that corporate greed, not external factors, is the primary cause of rising prices. Conversely, business groups are expected to counter, emphasizing the continued significance of factors like rising energy costs and labor shortages.

While the true cause of inflation is undoubtedly complex, the Groundwork Collaborative’s report underscores the necessity of addressing not only supply chain bottlenecks but also the distribution of wealth within the American economy to effectively tackle inflation.

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