Companies raise prices, protect profits but contribute to inflation

PepsiCo isn’t alone in continuing to raise prices. Other companies that sell consumer goods have also done well.

The average company in the S&P 500 stock index increased its net profit margin from late last year, according to FactSet, a data and research firm, countering Wall Street analysts’ expectations that profit margins would decline slightly. And while margins are below their peak in 2021, analysts predict they will continue to grow in the second half of the year.

For most of the past two years, most companies had “a great excuse to go ahead and raise prices,” said Samuel Rines, an economist and director of Corbu, a research firm that serves hedge funds and other investors. “Everyone knew that the war in Ukraine was inflationary, that grain prices were going up, blah, blah, blah. And they just took advantage of that.”

But those go-to reasons for raising prices, he added, are now diminishing.

The Producer Price Index, which measures the prices companies pay for goods and services before they are sold to consumers, peaked at 11.7 percent last spring. That percentage dropped to 2.3 percent for the 12 months through April.

The consumer price index, which tracks the prices of household expenses from eggs to rent, has also fallen, but at a much slower pace. In April, it fell to 4.93 percent, from a high of 9.06 percent in June 2022. The price of carbonated drinks rose nearly 12 percent in April, over the past 12 months.

“Inflation will remain much higher than necessary because companies are greedy,” said Mr Edwards of Société Générale.

But analysts suspicious of that explanation said there were other reasons why consumer prices remained high. Since inflation peaked in the spring of 2021, some economists have argued that as households emerged from the pandemic, demand for goods and services — whether garage doors or cruise travel — remained unsaturated due to lockdowns and limited supply chains, driving prices higher. became .