Did company profits fuel inflation? Bank of Canada researchers say no
Company profits are not to blame for the high inflation Canadians experienced in the past two years, a Bank of Canada report suggests.
Analysts with the central bank said in a report released Tuesday that data they studied across a number of sectors showed that the contribution of changes in corporate markups to inflation was limited.
After peaking at 8.1 per cent in June 2022, overall inflation fell to 2.8 per cent last month – within the Bank of Canada’s one-to-three per cent target range – but core metrics remain “stickier.” Core inflation refers to the change in the consumer price index, excluding more volatile items such as food and energy.
Canadians also continue to face high inflation at the grocery store – a sector that has come under fire with accusations of “greedflation” from some politicians – with prices rising 9.1 per cent annually in June.
In particular, NDP Leader Jagmeet Singh has made the increased profits a key issue for his party, calling on the Liberal government to impose an “excess profits tax” on corporations such as major grocery chains.
Grocery CEOs shot down those claims in March at a parliamentary hearing where they defended their “reasonable profitability” while insisting they are doing everything they can to keep prices low for Canadians, pinning the blame on suppliers and the global market.
Most recently, in its latest quarterly earnings report July 26, Loblaw attributed its higher profits to increased costs from global suppliers, while noting gross margins were lower.
“Counter to what we would expect if firms were using their market power to raise prices, increases in the markups of Canadian firms do not coincide with the high inflation in 2021 and 2022,” the Bank of Canada researchers
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