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Never waste a good crisis – a profit-price spiral in Germany
by ButterflyEffect

    Over the last two years, many of us will have had our suspicions that the latest price hikes aren't just the result of higher energy and commodity prices, but that some producers, suppliers and service providers have upped their costs, whether to make up for losses during the Covid-19 lockdowns or to increase financial buffers for worse times to come.

    In the minutes of the ECB’s February meeting, the issue of potential price markups not related to higher costs was raised for the first time. The minutes revealed that “profit growth remained very strong, which suggested that the pass-through of higher costs to higher selling prices remained robust...It was therefore widely stressed that developments in profits and markup warranted constant monitoring and further analysis on an equal footing with developments in wages”.

    According to a Reuters report in early March, the ECB had discussed analyses showing that profit margins in the eurozone had been rising rather than falling. As a consequence, profits rather than labour costs and taxes accounted for the largest chunk of domestic price pressures in the eurozone since 2021.