Inflation: corporate margins partly responsible for price increases?

Margaux Fodéré 09:01, March 25, 2023

Inflation remains one of the major concerns of the French. It is boosted by the cost of raw materials, but not only. Corporate margins are also being questioned, according to a study. Once contained, they started to rise again, enough to contribute to inflation in 2022.

Lower margins than in the past

At the end of last year, companies rebuilt part of their margins, weighed down by the energy crisis, which explains much of the price increase during this period. But their margins remain lower than they may have been in the past: 18% on average in the commercial sector.

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"This is one point less than what we had on average from 2010 to 2019," says Denis Ferrand, director general of the Rexecode institute.

Limiting the impact of rising prices

On the other hand, over the rest of the year, companies tried to limit the impact of rising energy and raw material prices so as not to increase selling prices too much or lose customers. "Initially, when all costs were rising, companies tended not to pass on the full cost shock and, in doing so, by reducing the margins they realize. And that's really the observation on last year's average," adds Denis Ferrand.

And it seems to have worked. The Bank of France has revised its inflation forecast downwards for 2023 to 5.4%.