Companies say they’ve raised prices in the COVID era to keep up with soaring production costs. But new research shows most consumers believe they are jacking them up more than necessary.
The trend has been dubbed “greedflation.” And an unlikely but growing alliance of shoppers, liberals and market-limiting conservatives say it explains why corporations are making record profits while presenting themselves as beleaguered.
In a survey of 2,000 shoppers that consumer researcher Attest released Tuesday, 80% said they believe brands have cited inflation as an excuse to hike prices. Another 58% said “more needs to be done” to protect consumers and stop companies from getting away with it.
“Inflation’s impact is weighing heavily on brand loyalty for American consumers, with … [88%] saying they are now willing to try different products and services due to price pressures,” Attest said, noting fast-spreading unhappiness with leading companies.
Three-quarters of respondents said groceries have seen the steepest price hikes and 71% said they’d consider different food brands. The next-biggest price hikes they reported were energy (37%) and travel (27%).
The survey comes after companies in last year’s Fortune 500 reported an all-time high of $1.8 trillion in profits on $16.1 trillion in revenue, despite inflation soaring to a four-decade high of 9.1% in 2022.
Companies last year blamed their price increases on the higher costs of everything from transportation to raw supplies and cited contributing factors from pandemic-era supply chain disruptions to rising oil prices and global economic disruptions arising from Russia’s invasion of Ukraine.
Consumers may be underestimating the impact of the war in Ukraine, one analyst told The Washington Times.
Boycotts of Russian natural gas raised costs for American farmers by cutting off Western nations’ access to inexpensive fertilizer, said Joe Trotter of the American Legislative Exchange Council, a network of conservative state lawmakers and investors.
And the Biden administration’s efforts to reduce U.S. reliance on natural gas by promoting clean energy alternatives like electric stoves to consumers have not made things cheaper, he added.
“Forget the ‘greedflation’ myth. Grocery prices are up for two specific reasons: the war in Ukraine and our government’s assault on fossil fuels,” Mr. Trotter told The Times.
Some analysts say that still fails to explain why American food and energy producers are seeing record profits.
A January 2023 study by the Federal Reserve Bank of Kansas City found more brands have jazzed profits through “markup growth,” increasing the ratio of sticker price to production costs. The bank found markups grew by 3.4% and inflation increased by 5.8% in 2021, suggesting markups could have accounted for more than half of inflation that year.
In a recent opinion piece, Albert Edwards, a global strategist at Société Générale, blamed such practices on an “unprecedented” and “astonishing” rise in corporate greed during the pandemic.
He pointed to the most recent figures from the Bureau of Economic Analysis, which show corporate profit margins in the fourth quarter of last year remained near record highs relative to costs despite the alleged hardships of rising production costs.
“The end of Greedflation must surely come. Otherwise, we may be looking at the end of capitalism,” Mr. Edwards wrote.
The strategist cited an earlier paper by University of Massachusetts Amherst economists Isabella Weber and Evan Wasner, titled, who blamed “the ability of firms with market power to hike prices” as the main cause of U.S. inflation in the COVID-19 era.
As more analysts blame price gouging for inflation, some say the government needs to impose temporary price controls.
Others, including free-market economists, say critics have exaggerated the profit margins.
The problem with the greedflation theory is that greed remains constant regardless of prices rising or falling, said Ryan Young, an analyst at the libertarian Competitive Enterprise Institute. He blames the “runaway spending” of the federal government’s pandemic relief efforts for the price hikes.
“Companies are always charging the highest prices they think consumers will accept,” Mr. Young said in an email. “Food prices were unchanged in March. Does that mean food companies didn’t get any more greedy, right after they became 0.4 percent greedier in February? It’s other things that are changing prices, not greed going up and down.”
More conservatives who feuded with companies over “woke” political advocacy during the pandemic are coming to reject that explanation, however. They have formed an unlikely alliance with progressive lawmakers who have called for increased corporate accountability.
Sen. Bernard Sanders, a Vermont Independent, recently rejected the farm industry’s claim that an avian flu outbreak caused egg prices to surge early this year by reducing the nation’s supply of hens.
“We must break up Big Ag,” Mr. Sanders said early this month after the nation’s largest egg producer reported that profits surged by 718% to $323.2 million during the quarter ending Feb. 25.
More companies have spent money on politically trendy diversity officers and transgender outreach instead of keeping prices down, said Will Hild, the right-leaning executive director of Consumers’ Research, a Washington, D.C.-based advocacy group.
He said the effect has been to distract consumers from rising prices with political posturing.
“Companies across America are increasingly passing on higher input and energy costs to consumers thanks to the greed of Wall Street,” Mr. Hild told The Times. “American consumers are now suffering the consequences of these foolish and destructive policies.”
Conducted on Feb. 15, the Attest survey found 15% of consumers said they would be concerned about any brand engaging in “left-wing, socially liberal politics” in public controversies. By comparison, 12% said they would worry about a company accused of right-wing politics.
Either way, companies have not been transparent about the reasons for marking up the prices of staple items like food, clothing and home utilities, said Edgar Dworsky, founder and editor of the website Consumer World. He said this lack of fiscal accountability makes it impossible to tell if and when brands engage in “greedflation.”
“I can suspect it, like everyone else, but don’t know for sure,” Mr. Dworsky said.
