Corporate profit growth has reportedly been outpacing wage increases
Inflation continues to rage in Western Europe, with monthly consumer prices soaring by over 14% in the UK and more than 10% in Germany, according to a Nikkei report. Some retailers have been hiking prices out of proportion with their underlying costs, it claimed.
Roughly 50% of price increases in the region resulted from local companies passing higher costs on to consumers, the outlet estimated. Consumption has slumped across the region as price increases have outpaced wage growth.
Nikkei cited an analysis of annual results from 70 European food retail and manufacturing companies by the management consultancy Oliver Wyman, which reportedly found that absolute EBITDA (earnings before interest, taxes, depreciation and amortization) rose by 11% at food retailers and 12% at manufacturers in 2022, compared to the previous year. That growth was mostly driven by increased revenues.
“Companies in the food sector viewed the inflation context as an opportunity to review their price management,” Rainer Muench, partner at Oliver Wyman, was quoted as saying.
According to the IMF data, cited by Nikkei, growth in corporate profits accounted for 45% of inflation in Europe last year, higher than the 40% attributed to the higher cost of imports. A survey of households by the European Commission reportedly found the perceived rate of inflation over the past year has risen to 26% among low-income families, the highest in 20 years.
Earlier this year, Bank of England Governor Andrew Bailey accused domestic retailers of driving ‘greedflation,’ claiming that certain businesses were “overcharging customers” as millions of families struggle to make ends meet. The BoE has also warned that British households and businesses need to accept that they are worse off and should stop asking for wage increases and pushing prices higher.