Although US consumer prices provided further signs of relief for consumers in April, there are still factors keeping inflation elevated — and corporations may be reaping the benefits of that.

 

“We’ve had a really unfortunate situation where we’ve had three very, very different inflation waves caused by very different things,” UBS Global Wealth Management Chief Economist Paul Donovan told Yahoo Finance (video above). “And they’ve just come one after the other. So it looks like you’ve had this continuous period of inflation.”

 

The first wave, primarily in consumer durable goods, “was demand-led,” Donovan explained. “That’s over. Durable goods prices in the States are falling. You’ve got outright deflation.”

 

That was followed by a second wave of supply-led inflation, he added, “and that was the energy shock coming out of the war in Ukraine.” And then “the third wave of inflation — the one we’re getting now — is this unusual profit-led inflation story.”

 

Sometimes called “excuseflation” or “greedflation,” profit-led inflation occurs when consumer-facing companies toward the end of the supply chain persuade shoppers to accept price hikes by pointing to plausible explanations (such as historically-elevated inflation). However, Donovan said, the true reason for these elevated prices could have more to do with expanding margins and keeping investor sentiment high than with increased input costs.

 

“It’s using excuses,” Donovan said. “It’s using a cover.”