US disinflation and the COVID-19 supply shock
US disinflation and the COVID-19 supply shock
www.brookings.edu
US disinflation and the COVID-19 supply shock | Brookings
25 comments
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Bare shelves during the COVID-19 pandemic may have made inventory managers more conservative. That more conservative approach to inventories, in turn, could have generated a wider gap between output prices (where higher prices diminish end demand and therefore boost inventories) and input prices...Output prices rose significantly more than input prices, i.e., firms hiked margins, potentially as a mechanism to better conserve inventory...(Note that this potential driver of COVID-era margin expansion is distinct from and potentially more plausible than “greedflation.”)
Maybe it started out as inventory managers trying to conserve inventory due to uncertainty, but if you look at the charts, output prices spiked even after input prices had come down significantly, and after supply chains had normalized considerably. I think once the businesses saw that people were still buying at the higher prices, and the record profits they were making, they couldn't turn down the opportunity. It was probably a combination of inventory management and greedflation. There's no reason why it has to be only one or the other.
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It was probably a combination of inventory management and greedflation. There's no reason why it has to be only one or the other.
Corporate price gouging has not been a primary driver of U.S. inflation, according to research published on Monday by economists at the Federal Reserve Bank of San Francisco.
While markups for motor vehicles and petroleum products did rise sharply during the 2021-2022 inflation surge, markups across the entire spectrum of U.S. goods and services have been relatively flat during the post-pandemic recovery, the bank's latest Economic Letter showed.
"As such, rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery," wrote the bank's research chief Sylvain Leduc and colleagues Huiyu Li and Zheng Liu.
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That's a different article. In the original article you posted, the included charts (charts 5 and 6) clearly show a spike in output prices, even after input prices had come down significantly, as I said.
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You're correct it is a different article. It is reporting on greedflation.
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Can you post the link for that article please?
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The study discussed in the Reuters link is:
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Well, maybe the analysts at the Fed made their determination prematurely. Maybe it's a blind spot in their analysis. I don't think companies planned it, necessarily. I'm sure they were as surprised as anyone that consumers were paying the higher prices, but the businesses were, nonetheless, more than happy to reap the rewards. I don't think it's that unbelievable. That's why businesses exist, to make as much profit as possible. If consumers are willing to give them more money, they'll take it. I certainly don't expect them to turn down the extra profits.
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Well, you're entitled to your opinions, I'll stick with the data.
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I'm not sure the data backs up what the Fed is claiming. Regardless, data doesn't necessarily tell the whole story, and if you look only at numbers, figures, and ratios, your analysis is likely insufficient.
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I disagree entirely. I would counter that your unsourced personal opinion does not counter data.
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Well, let's assess. Do you agree that businesses and companies exist primarily to make as much profit as possible? If so, wouldn't you also agree that it therefore makes sense for companies to seek to maximize profits at every available opportunity?
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Price gouging is an illegal practice that should have been stopped by the state.
The state allowed it to happen despite the law.
The state is captured by the rent seekers.
Everything is working as intended?
Also a lot of price gouging happened with things like food and rent.
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I think it's way more complicated than that, and that the article disagrees with your unsourced personal opinions. I had hoped you'd have some collection of well sourced articles backing up the simplistic assertion of "line goes up" meme that directly counters the specific data in the article, but unfortunately I see you do not have any reliable data to support your position, much less refute what is in the article. I don't see this going anywhere.
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I think it's way more complicated than that
It is, but I wasn't claiming to be offering an all encompassing theory of the universe, I was offering a premise for my argument. Saying, "it's complicated" is not a refutation of my premise.
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25 comments