Greedflation sweeps market
Corporate earnings account for a disproportionately high share of price increases
The “inflation of greed” in the Greek market during the period of the pandemic and the energy crisis was confirmed on Thursday by data from the Parliamentary Budget Office (PBO).
According to its quarterly report, presented by its coordinator, Professor Ioannis Tsoukalas, of the total 16% increase in inflation between the fourth quarter of 2019 and the first quarter of 2024, the share of profits was 9%, compared to only 4.1% of labor costs.
“The analysis shows that earnings contributed more than twice as much to cumulative growth in deflated GDP through 2024 as wage costs,” the report notes. In contrast, in the eurozone, labor costs have made a strong contribution to inflation, at around 10%.
As pointed out in the report, “businesses, either for reasons of weak competition or due to increased demand that came from the increased savings stock of households and tourism, managed to pass on the increases in imported costs to prices and significantly boost their profits.” The PBO notes that the phenomenon was observed in all eurozone countries during the first phase of the inflationary shock, but with significant differences per member-state.
According to figures published from time to time, Greece has taken the lead in earnings inflation, occupying one of the first positions in the EU. Moreover, according to a study by National Bank of Greece last May, about 5 percentage points of the total price hikes in food in the last two years are due to greedflation – i.e. increasing profit margins in the retail market. In further evidence of the phenomenon, the Governor’s Report of the Bank of Greece in April stated that the profit margin of businesses in 2021 and 2022 increased cumulatively by 15%.
The PBO study shows, however, that “in the last year, the share of wage costs has exceeded the share of profits in inflation.” Of the total change in the GDP deflator of 2.8% in the period between Q1 2023 and Q1 2024, the share of labor costs accounts for 1.65% in contrast to the share of earnings which has been reduced to 0.8%.
