PRICE INCREASE: What’s cool in an inflationary period is that you can increase your margins without it showing (too much)
When prices go up, the money has to go somewhere. And over the past two years in Europe, it has gone into the pockets of companies. It is not Karl Marx who says so, it is the International Monetary Fund (IMF), better known for its promotion of liberal structural reforms than of the socialization of the means of production.
In a study published Monday 26th June, the IMF indicates that “import costs rose after Russia invaded Ukraine and that companies more than passed on this increase to consumers”. In figures, since 2022, the rise in profits has been responsible for 45% of inflation, compared to 40% for import costs (mainly energy and raw materials) and only 25% for the rise in wages. For their part, taxes and duties, lowered by governments, had a slight deflationary impact. And the IMF concludes: “European companies have so far been better protected than workers against the negative cost shock”.
Companies will have to tighten their belts
But the IMF notes that after “having seen their wages fall by around 5% in real terms in 2022, workers are now pushing for wage increases”. The whole question is how quickly will wages increase and whether companies will squeeze their margins so that this does not affect prices. In any case, for the IMF, companies will have to tighten their belts so that “inflation reaches the ECB ‘s target by mid-2025”. Find out on your next payslip.
