Greedflation is a colloquial term for profit-price spiral. The word combines the two terms inflation and greed. Inflation has already caused prices to rise sharply. Not only energy prices, but especially food prices seem to know only one way: upwards. Greedflation denounces the approach of manufacturers to pass on unjustified price increases to customers.
In June 2023, the inflation rate was 6.1%. Although it fell a little from the previous month, food prices continued to rise significantly – by almost 15%. Currently, food costs 22% more than in the same period last year. Initially, crises due to the Corona pandemic, high energy costs and the Ukraine war triggered inflation. But it is now becoming increasingly obvious that companies are also driving up prices without need. This process is called greedflation. Now it is no longer cost pressure that is the trigger, but greed. The high costs are no longer comprehensible to most consumers. They no longer see the enormous price increases justified by energy costs. Consumers are not the only ones to accuse the manufacturers of pure greed behind this.
Monetary authorities have no real means of combating greedflation
Even the head of the ECB, Christina Lagarde, noted pronounced greedflation among companies in June 2023. She criticised the economy unusually harshly and argued that it was artificially driving up the inflation rate. For the high prices are not only an annoyance for consumers, the ECB also has a problem with them. But in the end it lacks the possibility to influence companies and stop their greed for profit. Because greed cannot be curbed with monetary policy.
The phenomenon of greedflation is not only criticised by the ECB; large insurance companies also see an increasing profit-taking on the part of manufacturers, which is supported by a lack of competition. They say this is particularly noticeable among producers of dairy products and seasonal fruit and vegetables. Prices have also risen disproportionately in tourism. For example, airline tickets sometimes cost twice as much as in the previous year, but paraffin prices have fallen sharply.
Just as for end consumers, the huge price increases are neither comprehensible nor justified for consumer advocates. In the meantime, the Federal Cartel Office has received several customer complaints about unfair price increases in the food sector. When asked by consumer advocates, the authority stated that it was monitoring the situation, but so far it has not intervened.
German government takes a stand on greedflation
For the German government, the main reason for the inflationary rise in food prices is the Russian war of aggression on Ukraine. This has had a considerable impact on agricultural markets, which have suffered enormous cost increases due to rising energy prices, a lack of raw materials and interrupted supply chains.
When asked about unjustified price increases in the food sector, the federal government wrote that it was hardly possible to make any statements about the factors driving inflation in relation to company profits. When asked to what extent it intended to intervene here, it replied that an amendment to the law had been drafted which would allow the Federal Cartel Office in future to order measures to promote competition. The Cartel Office may have to take action.