As ever, my hon. Friend makes the point about what is really happening out there. She gives a powerful example about baby food. I will come on to food and a policy suggestion for price caps later.
The chief economist of UBS global wealth management, Paul Donovan, has stated that
“much of the current inflation is driven by profit expansion. Typically one would expect about 15% of inflation to come from margin expansion, but the number today is probably around 50%.”
Albert Edwards, the global strategist at Société Générale, one of the largest financial services groups in Europe, tweeted:
“More Greedflation? When are government going to force a halt to this price gouging?”
Elsewhere, he explained how companies have
“under the cover of recent crises, pushed margins higher”.
In more technical language, but saying the same thing, Goldman Sachs economists said of the eurozone:
“Unit profit growth now accounts for more than half of GDP deflator growth, with compensation per employee growth explaining a little over a third.”
Central bankers are also raising concerns. In fact, the European Central Bank’s Fabio Panetta said that
“there could be an increase in inflation due to increasing profits.”
He has also said that
“unit profits contributed to more than half of domestic price pressures in the last quarter of 2022”.
Meanwhile, Lael Brainard, formerly of the Federal Reserve and now a White House official, said:
“Reductions in markups could also make an important contribution to reduced pricing pressures.”