In late 2021, economist Isabella Weber published a paper with a new idea. The theory, what she called 'seller's inflation,' sought to address the confounding fact that the economy was seeing rising high prices and skyrocketing corporate profits.
midweek podcast, I'm Micah Loewinger. In 2021 when inflation started to rise rapidly, economists and pundits tried to get a handle on what exactly was happening and what exactly would fix it, but as 2022 rolled around, one data point stuck out, prices were up, sure, but profits in some sectors were skyrocketing far past post-COVID predictions.Pepsi's prices last quarter were up 17% from a year ago, profits were up 21%. Chipotle's prices last quarter up 13%, profits up 26%.
I think of it as having basically three parts. The first is that companies are raising prices above what their costs would justify. It's not simply a function of, they have to pay more for inputs and therefore they charge more for the final product. It's that they're taking higher margin.
For example, the cost of energy was a huge driver of price increases. Everybody could see it posted on gas stations. Energy prices came down precipitously in 2022, and they're still fairly low and not going back up. Yet, the cost of things like beef, certain kinds of dairy, certainly housing, haven't come down all that much. That's because it's easier to pad margins when your prices have already gone up quite a bit.
They tell their investors very proudly, that they've managed to say"take price," or increased their margins because analysts will ask them like,"What are you doing to defend your margins? This is really great." Take the car companies. In 2020, all of their factories shut down, and it was very difficult to get semiconductors, so the supply was artificially constrained.
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