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Profit indicators for inflation analysis considering the role of total costs

Author

Listed:
  • Hahn, Elke
  • Renault, Théodore

Abstract

Standard indicators of profits in the economy derived from national accounts are based on GDP rather than on output and therefore do not consider the role of intermediate consumption. Differences between GDP-based and output-based profit indicators can be pronounced when there are exceptional developments in the cost of intermediate consumption, as recently observed. This box therefore proposes a new profit indicator based on total supply, which is a measure that corresponds more closely to output than GDP. Taken together, the GDP-based and total supply-based profit margin indicators suggest that in 2023 profits started to buffer the impact of labour cost developments on price pressures, but benefited from the decline in other costs. JEL Classification: E31

Suggested Citation

  • Hahn, Elke & Renault, Théodore, 2024. "Profit indicators for inflation analysis considering the role of total costs," Economic Bulletin Boxes, European Central Bank, vol. 4.
    • Handle: RePEc:ecb:ecbbox:2024:0004:6
    Note: 854549
    as

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    More about this item

    Keywords

    input cost shock; Profit margins;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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