Which industries are using inflation to boost profits

ucompanies in Germany have noisy Ifo Institute increased their prices at the end of 2022 more than would have been necessary due to the development of inflation and its costs. “These companies have used the situation to increase their profits significantly,” said Joachim Ragnitz, deputy head of the Ifo branch in Dresden, on Tuesday. “This applies above all to companies in retail, hospitality and transport as well as in the construction industry.”

In contrast, in agriculture and forestry, which were among the “inflation winners” in the summer of 2022, the rising costs have recently had an impact. Overall, development slowed down in the fourth quarter.

“Even if the rate is still high, the momentum of the price increases has weakened somewhat compared to the third quarter,” explained Ragnitz. “For consumers, there is hope that inflation has peaked.” The economist pointed out that the so-called gross operating surpluses have risen sharply in almost all major sectors of the economy. This is corporate profits plus depreciation and other net production charges.

According to Ragnitz, the only thing that helps against excessive price increases is more competition. The government could help bring down inflation by forgoing broad-based relief in favor of all households and restricting it to particularly poor households. “If, on the other hand, the unions were to prevail with their high wage demands, there would be a risk of a renewed surge in inflation.”

Verdi is currently demanding 10.5 percent more wages and salaries in the public sector at federal and local level, but at least 500 euros more per month. The union puts pressure on the employers with many warning strikes.