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Do Corporate Profits Increase When Inflation Increases?

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Abstract

When inflation is high, companies may raise prices to keep up. However, market watchers and journalists have wondered if corporations have taken advantage of high inflation to increase corporate profits. We look at this question through the lens of public companies, finding that in general, increased prices in an industry are often associated with increasing corporate profits. However the current relationship between inflation and profit growth is not unusual in the historical context.

Suggested Citation

  • Mathias Andler & Anna Kovner, 2022. "Do Corporate Profits Increase When Inflation Increases?," Liberty Street Economics 20220713, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:94468
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    File URL: https://libertystreeteconomics.newyorkfed.org/2022/07/do-corporate-profits-increase-when-inflation-increases/
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    More about this item

    Keywords

    inflation; profits; industries; margin; prices;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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