Treasury

Greedflation wasn’t the primary driver of inflation, SF Fed says

Markups that occurred in the past three years were “not unusual compared with previous recoveries,” the report said.
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We love a scapegoat, particularly when it comes to accusing corporate leviathans of exploiting everyday folks with unnecessarily high prices.

And that’s what we found with the concept of “greedflation,” aka when a giant corporation starts upping prices more than costs have actually risen. It gave us a handy excuse to complain every time we looked at our latest grocery store receipt to find that our entire life savings had vanished, and all we got in exchange was a couple of apples.

But a recent study from the Federal Reserve of San Francisco is here to say, “Let’s sit with our feelings, folks.” The greedflation theory might not have as much merit as previously believed.

SF Fed economists found corporate price hikes might not have been neither the primary driver of the 2021-2022 inflation surge, nor were they a key driver “of the recent disinflation that started in mid-2022.”

Their research found that some industries, like petroleum and motor vehicles, did experience “large cumulative markups during the recovery [period].” But even as this occurred in crucial industries, the report’s authors found that the overall markup across all sectors, which is “more relevant for inflation,” primarily remained flat throughout the post-pandemic recovery era.

And that was nothing unique; SF Fed economists noted it was “broadly in line with patterns during previous business cycle recoveries.” In all, they found that “the path of aggregate markups over the past three years is not unusual compared with previous recoveries.”

But this hasn’t stopped consumers from feeling the burn of high prices. Case in point: at the start of May, consumer sentiment dropped to a six-month low. We might not be able to cry greedflation forever, but that won’t stop us from trying.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.