Greedflation is the new word for when companies exploit inflation as a justification to increase their profit margins.
Especially in light of the fact that customers are facing a problem caused by cost of living, companies view it as cynical.
Also, the European Central Bank has issued a warning, noting that it is “closely” monitoring growing profits.
Recently, supermarkets reduced the price of milk and butter, which prompted requests that the government look at price controls on all necessary food items.
Labour TD, Ged Nash, said it was good news for shoppers but essentially confirmed that “price gouging is endemic throughout the grocery sector in Ireland”.
The government must pledge to collaborate with the CCPC to end this greedflation once and for all, according to the party’s spokesperson for finance and business.
“These big and brave supermarkets must also commit to meaningful price reductions across the range of other products that they are using to cream it in.”
There is no evidence to suggest that retailers’ profit margins have grown as a result of inflation, according to Retail Ireland, the Ibec group that represents the retail sector.
“If anything what has happened in many instances is Irish retailers delayed passing on increases in their supply chain to Irish consumers,” said Director of Retail Ireland, Arnold Dillon.
As a result of the government’s concern about the issue, the Retail Forum’s upcoming meeting, which comprises supermarkets and representative groups, has been brought forward.
Taoiseach Leo Varadkar reportedly told at a meeting of the Fine Gael parliamentary party that “grocery prices must come down if their input costs come down” in addition to pushing for the forum to be held “as soon as possible.”
The Central Statistics Office reported that, compared to the same time in 2021, adjusted domestic demand increased by 10.4% in the final three months of 2022.
Profits of domestic enterprises (not multinational corporations) rose by 17.7% during the same time period.
The Consumer Price Index rose 8.8% while domestic enterprises’ labour costs rose by 6.6%.
Economist, Austin Hughes, said normally, economists would expect profits to act as a ‘shock absorber’ but these numbers instead suggest they have been a ‘shock amplifier’.
The ECB increased interest rates for the seventh time on Thursday, in their ongoing efforts to bring down the rate of price increases.
We are living in an era of high inflation, and businesses are negotiating how they operate in these times.
Companies need to make a profit to survive. They have to ensure that they remain viable, and so they cannot let their costs rise more than their prices.
They have also been operating in the dark, forecasting by how much their costs will go up in an inflationary environment. Their forecasts, like the weather, might not always be accurate.
Firms don’t know if their costs will go up by 2% or 22% and may decide to raise prices by 10% when it turns out, costs only went up by 6%.
Retail Ireland’s Director Mr Dillon said Irish food inflation is significantly below the EU average.
“Irish retailers have a track record of reducing prices and keeping costs to households low,” he said.
Mr Dillon said Irish retailers are taking measures to reduce costs where possible. He said average grocery retail margins are traditionally much lower than others in the supply chain.
The European Central Bank (ECB) issued a warning that it is closely monitoring any possible price gouging of consumers.
It said that it was keeping a careful eye on both salary and profit trends.
The ECB meeting minutes from February state that “Profit growth remained very strong, which suggested that the pass-through of higher costs to higher selling prices remained robust.
“It was therefore widely stressed that developments in profits and markup warranted constant monitoring and further analysis on an equal footing with developments in wages.”