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Do not buy into that narrative. This inflationary process has been mostly driven by monetary policy. Margin increases are the result of businesses trying to nav

by josu 3y ago

Do not buy into that narrative. This inflationary process has been mostly driven by monetary policy. Margin increases are the result of businesses trying to navigate an inflationary period. These margin increases are not resulting in increased profits across the board (there are some notable exceptions). For example, Carrefour's profits in 2022 were about the same as in 2019. [1] From the article you linked: "Profits (adjusted for inflation) were about 1 percent above their pre-pandemic level in the first quarter of this year." [1] https://finance.yahoo.com/quote/CA.PA/financials?p=CA.PA https://finance.yahoo.com/quote/CA.PA/financials?p=CA.PA

winter_blue 3y ago
Canadian retailer profits have been off the charts, fwiw. Inflation has been quite brutal and merciless in Canada, with retail chain owners fat extra paychecks in the tens or hundreds of millions.
rocgf 3y ago
I am amazed to finally see a comment like yours, I've argued this point in various contexts and I was treated like I am crazy.
m000 3y ago
> Do not buy into that narrative. ... Carrefour's profits in 2022 were about the same as in 2019. Isn't this exactly why we should buy into this narrative? The manufacturers increased their margins, so Carrefour sells more expensive, but in the end gets the same total profit.
- deelowe 3y ago
  The parent is saying that these "increase in margins" are companies trying to get ahead of inflation. The media narrative has been to blame the corporations, despite the real issue being the economy. There are elections to worry about, so we can't have that. Smart businesses don't wait until they start losing money to make adjustments. They plan ahead. These "margin increases" are literally increases due to inflation which will companies expect to take hold over the next 1-2 years. There could be a variety of factors for this. One such example is corporate bonds rolling over to new interest rates which are expected to start happening en masse very soon.
  - Loughla 3y ago
    >The media narrative has been to blame the corporations, despite the real issue being the economy. This might be a really, really stupid question, but aren't corporate decisions sort of the economy?
    - deleted 3y ago
      [deleted]
  - m000 3y ago
    Manufacturers trying to get ahead of inflation and ending up with record profits. How convenient. I'll buy the media narrative this time, thank you.
    - kortilla 3y ago
      They are only record profits when you don’t adjust for inflation. Companies in Zimbabwe were making record profits every year, what a booming economy!!!
    - deleted 3y ago
      [deleted]
    - deleted 3y ago
      [deleted]
justinclift 3y ago
Here in Australia we seem to be having high inflation of food, which the main supermarkets (a duopoly) are blaming on the cost of goods. Meanwhile, they've both reported their highest ever company profits. :( So, clearly they're full of shit about the cost of goods being the cause rather than their own price gouging.
- Manuel_D 3y ago
  Record profits in a period of inflation is not surprising. If the value of the Australian dollar halves, then a company doubling it's raw profit figures is really just staying maintaining the same profits in real value.
  - justinclift 3y ago
    If the value of the Australian dollar halves, and a company manages to double its raw profit figures... doesn't that still sound like price gouging? Why would their "maintaining the same profits in real value" be acceptable when no-one else in the end to end chain (producers, customers, etc) managed to in the situation.
    - nradov 3y ago
      What is price gouging?
    - Manuel_D 3y ago
      It's not price gouging: the value of currencies are almost certainly never going to return to their pre-pandemic levels. Price gouging typically refers to raising prices in a specific exceptional situation like a disaster. Inflation is not exceptional, it's happening worldwide (though more in some countries than others). It's also not a temporary. It's lasted years and even if inflation returns to 2% the prices are going to stay high. Again, if the value of currency halves and profits in raw curry terms doubles then profit in terms of real value has remained the same. If a company pays it's employees $30 and the value of currency halves, and it raises wages to $45 did they really raise wages? In raw terms, yes, but in real terms no. The value of wages has actually gone down.
PowerfulWizard2 3y ago
The research paper linked by the parent comment is using Gross Operating Surplus and EBITDA metrics: Gross operating surplus differs from profits shown in company accounts for several reasons. Only a subset of total costs are subtracted from gross output to calculate the gross operating surplus. Essentially it is gross output less the cost of intermediate goods and services to give gross value added, and less compensation of employees and taxes and subsidies on production and imports. There are obvious financial cost increases that have happened which are falsely represented as 'profit' in this analysis.
milesvp 3y ago
Without a doubt monetary policy has fueled inflation, but do not ignore the policies of allowing corporate mergers for the last 40 years. Lack of competition reduces price elasticity, and the end game of every monopoly is to raise prices. We are living in a world of global monopsonies, and my expectation is to contine to pay this monopoly tax for years. Worse, is it’s never been easier to collude. It used to be you had to pay a big consulting firm big money for them to tell you “current market rates” for many goods and services. Now you can just subscribe to same SaaS everyone in your industry uses and have it tell you how much to charge. This tends to help break out of a prisoner’s dilemma. This was something I never quite anticipated. I used the intenet when it was young to help do price discovery and find better deals. Never occurred to me the end game was for companies to do it even better for pricing. Even after seeing thrift store pricing adjust due to seeing online prices on ebay, it didn’t occur to me the scale it would happen elsewhere.
- kortilla 3y ago
  There are 20 different burger restaurants within 10 miles of me. Some are chains, some are local. Some use major beef suppliers, some use local organic ones. All of their prices have gone way up. There is no collusion here and this has jack shit to do with mergers. If those were the causes, inflation would have been a crisis 10 years ago.
  - Draiken 3y ago
    The only collusion is the default one: profit at all costs. Everyone raises prices to increase profits, increasing inflation, that increases prices further... I don't understand why people are so happy to blame governments and treat companies, in which profit is their raison d'être, as if they're only "reacting to the government". Of course both are to blame, but let's stop pretending companies are victims while record profits are seen everywhere (adjusted to inflation). Many (if not most) are clearly taking advantage of this exact sentiment against the government to pocket even more profit. It's not me, it's the inflation!
    - josu 3y ago
KennyBlanken 3y ago
That "narrative" is coming from food corporations bragging in their quarterly earnings calls that they're not lowering prices even as fuel, labor, and material prices fall coming off the pandemic, because they've gotten people used to the higher prices.
whazor 3y ago
Sorry but branded products particularly from big brands like Unilever have become crazily expensive. The branded product is sometimes up to 5 times more expensive than the store brand for the same product. To me the most crazy product that was too expensive was some water ice, which is literally water, sugar, and some flavoring/coloring. Sure there is inflation, but maybe those companies keep sending excel files to each-others department and keep increasing prices multiple times more than needed.

by josu 3y ago

winter_blue 3y ago

Canadian retailer profits have been off the charts, fwiw. Inflation has been quite brutal and merciless in Canada, with retail chain owners fat extra paychecks in the tens or hundreds of millions.

rocgf 3y ago

I am amazed to finally see a comment like yours, I've argued this point in various contexts and I was treated like I am crazy.

m000 3y ago

> Do not buy into that narrative. ... Carrefour's profits in 2022 were about the same as in 2019. Isn't this exactly why we should buy into this narrative? The manufacturers increased their margins, so Carrefour sells more expensive, but in the end gets the same total profit.

deelowe 3y ago
The parent is saying that these "increase in margins" are companies trying to get ahead of inflation. The media narrative has been to blame the corporations, despite the real issue being the economy. There are elections to worry about, so we can't have that. Smart businesses don't wait until they start losing money to make adjustments. They plan ahead. These "margin increases" are literally increases due to inflation which will companies expect to take hold over the next 1-2 years. There could be a variety of factors for this. One such example is corporate bonds rolling over to new interest rates which are expected to start happening en masse very soon.
- Loughla 3y ago
  >The media narrative has been to blame the corporations, despite the real issue being the economy. This might be a really, really stupid question, but aren't corporate decisions sort of the economy?
  - deleted 3y ago
    [deleted]
- m000 3y ago
  Manufacturers trying to get ahead of inflation and ending up with record profits. How convenient. I'll buy the media narrative this time, thank you.
  - kortilla 3y ago
    They are only record profits when you don’t adjust for inflation. Companies in Zimbabwe were making record profits every year, what a booming economy!!!
  - deleted 3y ago
    [deleted]
  - deleted 3y ago
    [deleted]

justinclift 3y ago

Here in Australia we seem to be having high inflation of food, which the main supermarkets (a duopoly) are blaming on the cost of goods. Meanwhile, they've both reported their highest ever company profits. :( So, clearly they're full of shit about the cost of goods being the cause rather than their own price gouging.

Manuel_D 3y ago
Record profits in a period of inflation is not surprising. If the value of the Australian dollar halves, then a company doubling it's raw profit figures is really just staying maintaining the same profits in real value.
- justinclift 3y ago
  If the value of the Australian dollar halves, and a company manages to double its raw profit figures... doesn't that still sound like price gouging? Why would their "maintaining the same profits in real value" be acceptable when no-one else in the end to end chain (producers, customers, etc) managed to in the situation.
  - nradov 3y ago
    What is price gouging?
  - Manuel_D 3y ago
    It's not price gouging: the value of currencies are almost certainly never going to return to their pre-pandemic levels. Price gouging typically refers to raising prices in a specific exceptional situation like a disaster. Inflation is not exceptional, it's happening worldwide (though more in some countries than others). It's also not a temporary. It's lasted years and even if inflation returns to 2% the prices are going to stay high. Again, if the value of currency halves and profits in raw curry terms doubles then profit in terms of real value has remained the same. If a company pays it's employees $30 and the value of currency halves, and it raises wages to $45 did they really raise wages? In raw terms, yes, but in real terms no. The value of wages has actually gone down.

PowerfulWizard2 3y ago

The research paper linked by the parent comment is using Gross Operating Surplus and EBITDA metrics: Gross operating surplus differs from profits shown in company accounts for several reasons. Only a subset of total costs are subtracted from gross output to calculate the gross operating surplus. Essentially it is gross output less the cost of intermediate goods and services to give gross value added, and less compensation of employees and taxes and subsidies on production and imports. There are obvious financial cost increases that have happened which are falsely represented as 'profit' in this analysis.

milesvp 3y ago

Without a doubt monetary policy has fueled inflation, but do not ignore the policies of allowing corporate mergers for the last 40 years. Lack of competition reduces price elasticity, and the end game of every monopoly is to raise prices. We are living in a world of global monopsonies, and my expectation is to contine to pay this monopoly tax for years. Worse, is it’s never been easier to collude. It used to be you had to pay a big consulting firm big money for them to tell you “current market rates” for many goods and services. Now you can just subscribe to same SaaS everyone in your industry uses and have it tell you how much to charge. This tends to help break out of a prisoner’s dilemma. This was something I never quite anticipated. I used the intenet when it was young to help do price discovery and find better deals. Never occurred to me the end game was for companies to do it even better for pricing. Even after seeing thrift store pricing adjust due to seeing online prices on ebay, it didn’t occur to me the scale it would happen elsewhere.

kortilla 3y ago
There are 20 different burger restaurants within 10 miles of me. Some are chains, some are local. Some use major beef suppliers, some use local organic ones. All of their prices have gone way up. There is no collusion here and this has jack shit to do with mergers. If those were the causes, inflation would have been a crisis 10 years ago.
- Draiken 3y ago
  The only collusion is the default one: profit at all costs. Everyone raises prices to increase profits, increasing inflation, that increases prices further... I don't understand why people are so happy to blame governments and treat companies, in which profit is their raison d'être, as if they're only "reacting to the government". Of course both are to blame, but let's stop pretending companies are victims while record profits are seen everywhere (adjusted to inflation). Many (if not most) are clearly taking advantage of this exact sentiment against the government to pocket even more profit. It's not me, it's the inflation!
  - josu 3y ago

KennyBlanken 3y ago

That "narrative" is coming from food corporations bragging in their quarterly earnings calls that they're not lowering prices even as fuel, labor, and material prices fall coming off the pandemic, because they've gotten people used to the higher prices.

whazor 3y ago

Sorry but branded products particularly from big brands like Unilever have become crazily expensive. The branded product is sometimes up to 5 times more expensive than the store brand for the same product. To me the most crazy product that was too expensive was some water ice, which is literally water, sugar, and some flavoring/coloring. Sure there is inflation, but maybe those companies keep sending excel files to each-others department and keep increasing prices multiple times more than needed.