Gina Bolvin, president of Bolvin Wealth Management Group, discusses commodity movements, expected inflation data, the housing industry and the outlook for consumers.
President Biden and other Democrats have frequently blamed corporate price gouging for chronic inflation, which causes Americans to pay more for everyday items.
However, new research results have been published. federal reserve Bank of San Francisco suggests that corporate greed is not the main driver of the inflation spike that began in early 2021.
Although some companies raised prices after the coronavirus pandemic, such as gasoline and auto prices, which saw sharp increases in 2021, researchers found that overall price increases remained broadly flat. , found that this is consistent with the economic recovery of the past 30 years.
“These patterns suggest that markup changes were not the main driver of inflation ups and downs during the post-pandemic recovery,” write Sylvain LeDuc, Li Huiyu and Zheng Liu in the bank’s weekly I’m writing about it in a magazine. economic letter.
Inflation has increased by 20% since President Biden took office.
Customers shop at a supermarket on September 13, 2023 in Foster City, California. (Photo Credit: Li Jianguo/Xinhua News Agency via Getty Images/Getty Images)
This finding runs counter to recent government promotion. Biden blames ‘shrinkflation’ – When companies reduce package sizes and portion sizes of food products while raising prices or keeping prices the same – and companies’ greed for still-high prices.
In late February, the White House launched a new task force aimed at tackling the “unfair and illegal” corporate pricing that Biden blamed for frustratingly high food prices.
Why are groceries still so expensive?
“Too many companies are raising prices to inflate their profits, charging more and more for less and less,” Biden said in his State of the Union address earlier this year. “That’s why we’re cracking down on companies that engage in price gouging and deceptive pricing on everything from food to health care to housing.”
President Biden speaks to guests at electrical equipment manufacturer Ingeteam Inc. on August 15, 2023 in Milwaukee, Wisconsin. (Biden speaks as guest at Ingeteam Inc./Getty Images)
San Francisco Fed researchers said that while corporate profits have indeed risen since the pandemic, profits have “generally been volatile” and often rise in the early stages of an economic recovery. Data on the current recovery suggests that the rise in corporate profits has “not been particularly marked relative to past recoveries” that didn’t have high inflation.
“Overall, our analysis suggests that markup fluctuations were not the main driver of the post-pandemic inflation spike or the recent increase in inflation that began in mid-2022,” the researchers wrote.
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As many economists have pointed out, rampant inflation in 2021 and 2022 resulted in soaring prices for everything, including groceries, new cars, and health insurance. Including the San Francisco Fed. –I agree that it was caused by supply chain disruptions, extremely tight labor markets, and increased consumer demand due to multi-trillion dollar stimulus packages.
Inflation has fallen significantly from its peak of 9.1%, but remains well above the Fed’s 2% target. And just before that, compared to January 2021, the inflation crisis has begunPrices increased by a staggering 19.4%.
