Profit-making will wane as US and EU inflation driver

Significance

Headline consumer price inflation is edging down in the United States and the euro-area, but companies are accused of being slow to pass lower costs to consumers. These suspicions echo earlier criticisms that corporations did little to mitigate the impact of higher supply costs, and even took advantage of them to raise their profit margins.

Impacts

• US profits fell in first-quarter 2023, but downward profit adjustments could be slower in the euro-area due to structural factors.
• Food inflation has declined in the United States but remains higher in the euro-area due to lower competition and higher energy prices.
• Net profits rose by less in the euro-area than in the United States in 2020-22, so any euro-area decline may appear relatively smaller.