Greedflation: They're Reading The Blog -- June 30, 2023

Locator: 44839ECON.  

On June 15, 2023, I first mentioned "greedflation."

"Greedflation":

The true reason for these elevated prices could have more to do with expanding margins and keeping investor sentiment high than with increased input costs.

"It's using excuses," Donovan said. "It's using a cover."

Since then, I've discussed it on the blog four different times, including using really, really cheap white bread and Kroger as an example.

Today, of all things, it ("greedflation") pops up again. This time in The WSJ. Whoo-hoo.

And what does the writer use as an example: obscene profit / greed by supermarkets using "inflation" as a cover.

The next phase in the war against inflation is taking shape in Europe, where governments are actively cajoling businesses to cut prices on everything from pasta to chicken.

Their argument: Profits are too high.

The European Union’s statistics agency Friday said consumer prices in the 20 countries that share the euro were 5.5% higher than a year earlier, a decline from the 6.1% inflation rate recorded in May, and the slowest increase since the start of 2022.

However, that slowdown in inflation has largely been due to falling energy prices.

The core rate of inflation—which excludes volatile items such as energy and food—rose to 5.4% in June from 5.3% in May.

More worryingly for households, food prices continued to rise at a rapid pace, albeit more slowly than in recent months. After last year’s steep energy-price rises normalized, sharp increases in food bills this year have alarmed European governments. Now they are pushing back by putting pressure on grocery stores and food producers to limit or reverse price rises.

Those moves fall short of the price controls that governments introduced in the early 1970s, but edge Europe toward a more interventionist approach on inflation than the U.S., where the pace of price rises has slowed more sharply over recent months.

In France, where food prices have increased by more than 14% over the past year, the government is trying to persuade the country’s largest industrial companies to lower their prices.

“We will not allow big industrial companies to make undue margins,” French Finance Minister Bruno Le Maire said recently, adding that he was ready to name and shame companies unwilling to pass on lower costs to consumers, or even create a special tax on the profits of those companies.

Wow, greedflation. Ya gotta love it.

Let's look at two paragraphs from the above story.

First:  

More worryingly for households,food prices continued to rise at a rapid pace, albeit more slowly than in recent months. After last year’s steep energy-price rises normalized, sharp increases in food bills this year have alarmed European governments. 

Now they are pushing back by putting pressure on grocery stores and food producers to limit or reverse price rises. 

We lived in Europe for thirteen consecutive years. With regard to European grocers, this is what I noticed, two things:

• a reliance on small mom-and-pop grocery stores; few large supermarkets (the norm in the US); and, 
• little competition, so little opportunity for price comparison.

Here, in an urban area in which I live, two minutes apart from each other: Tom Thumb, Albertson's (also owns Tom Thumb), Target, and Walmart. HEB is moving in. Huge competition. Across town, ten minutes by car: Costco. Where they still have $4.99 rotisserie chickens. And, then, of course, best deal for everyone: Amazon for non-perishables.

American grocery shoppers are very, very good at cutting back when prices get too high. I'm seeing that in potato chhips right now where Target has cut prices in half going into the July 4th weekend.

Second paragraph:

“We will not allow big industrial companies to make undue margins,” French Finance Minister Bruno Le Maire said recently, adding that he was ready to name and shame companies unwilling to pass on lower costs to consumers, or even create a special tax on the profits of those companies.

Yes, that will bring prices down at the counter for the average shopper. LOL.  

Again, back to this:

"Greedflation":

The true reason for these elevated prices could have more to do with expanding margins and keeping investor sentiment high than with increased input costs.

"It's using excuses," Donovan said. "It's using a cover."

Parse those two sentences:

• the need to keep investors happy
• expand margins
• use "inflation" as a cover