Marketplace, July 2023
Listener and reader Alice Carli from Rochester, New York, asked this question earlier in the year:
We’ve been hearing lately about the wage-price spiral. Has anyone ever looked into the potential for a profit-price spiral? Where prices go up due to costs, supply, whatever reason, and manufacturers, distributors or platforms not only cover their costs, but make some amount of increased profit that then becomes a new profit “floor”? Do expectations of profit go up and down in a given sector — or just up?
Consumer prices started rising sharply in 2021, peaking at a 40-year high of 9.1% inflation in June 2022. This was caused by a slew of factors including pent-up demand due to the pandemic, supply chain constraints, and higher energy costs spurred by the Russia-Ukraine War. Inflation has started to cool down in recent months and is now at 3%, but amid the thick of the battle to tame rising prices, the Federal Reserve had been concerned about rising wages.