Inflation continues to tighten its grip on Western Europe as monthly consumer prices register an unprecedented rise – soaring over 14% in the UK and surpassing 10% in Germany. This harsh reality has been amplified by instances where retailers have been found guilty of disproportionately increasing prices, independent of their foundational costs.
Nearly half of these escalating price increments within the region can be chalked up to local enterprises shifting their bloated expenses onto the consumer’s shoulders. This has resulted in dwindling consumption rates throughout the region, a consequence of escalating prices outpacing wage increment trends.
An evaluation of annual performance from 70 European entities within the food retail and production sector – a study conducted by management consulting firm Oliver Wyman – has revealed intriguing insights. Total EBITDA (earnings before interest, taxes, depreciation, and amortization) sprang into a rise of 11% among food retailers and displayed a 12% increase among manufacturers in 2022 – an uptick primarily spirited by revenue augmentation.
Rainer Muench, a partner at Oliver Wyman, suggested that these food sector businesses saw the rampant inflation as a chance to reevaluate and rebalance their pricing strategies. According to data amassed by the International Monetary Fund (IMF), this surge in corporate profit contributed to 45% of the preceding year’s inflation in Europe. Interestingly, it surpassed the 40% section attributed to costlier imports.
A survey conducted by the European Commission exhibited the stark reality that the subjective rate of inflation rates was most acutely felt among low-income households – notching a hefty 26% increment; a rate unseen in the past two decades.
In an attempt to douse the flames of this rapid ‘greedflation,’ Andrew Bailey, the Governor of Bank of England, earlier this year criticized domestic retailers for overinflating prices, causing strain on millions of households striving to remain financially afloat. The Bank of England further emphasized the need for British households and businesses to recognize their declining economic state, urging them to refrain from demanding wage increases that would inevitably lead to further price hikes.