Inflation fell to its lowest annual rate in more than two years during June, the product both of some deceleration in costs and easy comparisons against a time when price increases were running at a more than 40-year high.
Inflation fell to its lowest annual rate in more than two years during June, the product both of some deceleration in costs and easy comparisons against a time when price increases were running at a more than 40-year high.
That’s not how net profit works. Net profit takes into account the cost of goods, if cost of goods, doubles, and gross profit doubles, net profit hasn’t changed at all. These companies are taking advantage of the fact that cost of goods (including shipping) have gone up to massively crank up prices, hence record net profits.
Corporate profit margins hit a 70 year peak in 2022 despite plenty of supply turbulence in the highest inflation since the 1980s.
Yes, it is.
Expenses: $500
Revenue: $1000
Net profit: $500
Now, say we’ve had runaway inflation, and the dollar is suddenly worth half as much.
Expenses: $1000
Revenue: $2000
Net profit: $1000
You might thing, “hey, that’s $500 more dollars!” Yes, but these dollars have half the value as they did in the previous scenario, so you have the same amount of actual value as before the inflation, even though the absolute number is higher and thus you’ve broken records. Profit margin is a much more useful metric to look at, and that is unchanged in this example.
Now, as I understand, there are some industries where profit margins have noticeably increased, and there are interesting questions that can be asked there. But profits going up simply isn’t a very interesting thing. Profits remaining static is actively a bad thing, because again, inflation is a thing. To flip this around, a worker never getting a raise in 20 years is obviously not doing very well. Workers need regular raises just to keep up with inflation. The exact same thing is true for businesses as well.