Uncovering the Truth: How Corporate Earnings are Inflating the Cost of Living

The concept of “greedflation,” where profits surpass inflation and lead to a significant increase in the cost of living due to corporate greed, was recently examined in a study by Money.ca. The study revealed that corporate greed is a major driving force behind the rising cost of living for Canadians.

“Some economists may dismiss ‘greedflation’ as a mere buzzword,” says Cory Santos, finance editor at Money.ca and the author of the report. “But how else do you explain the situation where official data show decreasing inflation, yet prices continue to rise, corporate profits are soaring, and the average Canadian’s savings are dwindling?”

Santos emphasizes that financial education and smart budgeting practices are crucial defenses against exploitation and the keys to long-term financial stability. “By learning and applying these best practices, Canadians can equip themselves with the knowledge and skills to navigate through ‘greedflation’.”

Corporate profits accounted for over 50% of inflation in 2023, compared to 11% pre-pandemic

Since the onset of the pandemic, Canadians have faced a sharp increase in the cost of living. In June 2022, inflation rose to 6.8%, the highest in almost 40 years. Although inflation has now stabilized at 2.3% as of May 2024 (the country’s average from 1915 to 2024 is 3.15%), prices in certain sectors remain elevated.

A report from Groundwork Collaborative reveals that corporate profits contributed 53% to inflation in the second and third quarters of 2023, a significant increase from the 11% seen pre-pandemic. FactSet, a U.S.-based financial data company, notes that the profit growth rate for S&P 500 companies is at 9.8%, the highest year-over-year earnings growth rate in years.

Key findings

Here are some key findings from the report:

Inflation driven by corporate profits. Companies have raised prices much faster than any increase in their costs, contributing significantly to inflation. This contrasts with the belief that corporate greed only contributed about 10% to inflation in 2021.

Passing on increasing costs to consumers. Large companies are cutting costs to maximize profits and passing on additional shipping expenses to consumers through higher prices.

Impact on consumers. Inflated prices have had a profound impact on essential goods like food and fuel. For instance, while general food inflation peaked at 8.8% in 2022, prices have remained high. Despite the decrease in the inflation rate, food prices have not dropped. The average cost of food for a family of four will be $16,297.20 in 2024, up $701.79 from 2023.

Read the full study here.