Profits are up, according to a business survey. This time, it probably isn’t due to “greedflation.”
We’re going to be hearing from a lot of companies this week about how they did in the most recent quarter. Verizon reported earnings Monday and Google’s parent company, Alphabet, reports Tuesday. Microsoft and Tesla are reporting as well.
Investors will be paying close attention to the usual data points: How much revenue the companies took in and how much profit they generated.
Regarding the latter, a survey of business owners, economists and industry leaders released Monday by the National Association for Business Economics found that this month, profits hit their highest level since October 2021.
This time last year, more survey respondents said profits were falling. Not rising. But Michael Uhrich, chief economist at Seventh Point Analytic Consulting and a survey analyst for the National Association for Business Economics, said the trend of increasing profits isn’t exactly new.
“It goes back the last few surveys. And we’ve had pretty strong economic health reflected in the survey for a while now,” Uhrich said.
One reason is a lot of companies’ input costs have eased up. Shannon Grein, senior economist at Wells Fargo, said that includes labor, raw goods and other expenses.
“And just given as supply chains have normalized, I think the cost environment has also normalized,” said Grein.
But Grein said this is a very different environment from 2021 and 2022, when corporate profits were surging. And so were prices.
“Labor was in short supply, supply chains were out of balance, there were inputs that you just simply couldn’t get your hands on, and I think it was easier to explain why a firm was raising prices,” said Grein.
That kind of behavior — call it capitalism, call it opportunism, call it greedflation — just isn’t as easy to justify now.
“We’re not seeing the sort of over-the-top consumer demand that underpinned very, very strong price increases, where people would just pay whatever would be charged,” said George Pearkes, a macro strategist at Bespoke Investment Group.
Overall, Pearkes said, companies will still raise prices to protect profits where they can, “but there’s just no reason to think that the greedflation story is relevant for the 2024 economy like it was for the 2021, 2022 economy.”
Instead, price increases right now are looking more like they did before the pandemic.