Datawatch: Unchecked corporate pricing power is a factor in US inflation

US corporate profit margins have reached levels not seen since the aftermath of World War II.

US after-tax profit margins

According to a paper published by the University of Massachusetts, there is a strong correlation between the rising share of corporate profits in gross domestic product and the sharp price increases in the US after the Covid pandemic.

Large companies, which have reaped windfall profits from volatility in commodity prices and supply shortages, have been encouraged to continue raising prices to improve profit margins.

They found that there was little evidence that the models used to explain the inflation of the 1970s – such as excessive aggregate demand, expansion of the money supply, or spiraling rises in labor costs – applied to this recent surge. Covid-19 price increases are predominantly seller inflation, they say. When all of their competitors experience cost increases, companies have felt safe passing them on in the expectation of an “implicit agreement” that competitors will do the same.

Federica Cocco and Keith Fray

Our other charts of the week. . .

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The introduction of remote work as a result of the pandemic has helped increase birth rates, particularly among wealthier and more educated women.

“While the continued decline in fertility rates in developed countries makes it difficult to be overall optimistic about the future trajectory of births, the increase in remote work is a factor that will likely help push at least some subgroups in the other direction,” according to the authors of the analysis from the Economic Innovation Group, a US-based think tank.

Rising birth rates would significantly boost economic growth and offset demographic changes such as an aging population.

The study also found that unmarried remote workers were significantly more likely to plan to get married in the next year than those not working remotely. This may be because remote workers have higher migration rates than other workers, meaning those interested in marriage may have been able to move closer to a potential spouse.

Federica Cocco

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Britons’ support for the EU leadership, which has been rising since 2013, exceeded 50 percent in 2022 for the first time since the survey began. At 51 per cent, that is more than the 46 per cent who approve of the UK leadership.

The last time a majority of Britons endorsed the country’s leadership was in 2006, when Tony Blair was Prime Minister.

Federica Cocco

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A majority of Brits support strikes by nurses and ambulance workers. According to the opinion research institute Ipsos, the share has risen by 3 percent since January.

Teachers and railway workers are the second most supported, with sympathy also rising since January, while support for strikes in other sectors, including border and passport control staff, civil servants, university staff and driving examiners, has fallen.

Talks on Thursday between ministers and health unions resulted in a promising salary offer. Significantly improved conditions for nurses, ambulance staff and other NHS workers in England have raised hopes that other disputes may soon be settled.

The RMT agreed to vote members over an improved Network Rail offer and teachers’ unions on Friday began talks over pay, conditions and workload.

Serena Chan

Bar chart of As % of all passenger cars showing that SUVs have a record share of new car sales in the EU

Europe’s energy crisis hasn’t put customers off big cars.

In January, total sales of sport utility vehicles rose 14 percent year-on-year to 464,000 units – a record 51 percent share of new car registrations in the EU, according to market research firm Jato Dynamics.

While gas-guzzling and diesel models remained the most popular choices, accounting for about three-quarters of new SUV sales, figures show that demand for plug-in hybrid and pure electric versions of the Chelsea Tractor is gaining ground.

Despite the launch of more environmentally friendly electric models, SUVs continue to enjoy great popularity. Plug-in hybrid SUVs, which offer a compromise between lower-emission combustion engines and expensive, all-electric vehicles, are of particular interest.

Patrick Mathurin

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