CWG Insight Series: Profit-Led Inflation May Be to Blame

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Why do the costs of your lattes, groceries, and vacations keep going up? Of course, the answer is “inflation.” But there’s more to the story now than there was in prior years.     

Make no mistake about it, we here at Crown love free market capitalism, but it isn’t perfect. One glaring imperfection is that some of America’s favorite brands are continuously raising their prices and blaming it on inflation. They do it because they can, not always because they need to.   

Their price increases are causing inflation, not the other way around.   

Since the beginning of the pandemic, inflation has gone through distinct periods where it was first driven by demand shocks in 2020, followed by supply issues in 2021. We have now entered a period where inflation is largely being driven by corporate profit margins.   

The public is unaware, having become accustomed to rising prices as a way of life.   

The price increases will not stop until one of the following occurs:

  1. A large cohort of consumers can’t pay any higher prices
  2. Consumers become aware and choose not to spend

The reasoning behind the two options is rooted in fundamental economics and would require a much longer, and boring, letter.   

We can comfortably predict that #1 will occur before #2. This is unfortunate as #1 is a longer, more drawn-out process that will result in higher unemployment and possibly a difficult recession.   

We don’t blame the corporate management teams. They are doing what they are supposed to be doing: growing or protecting their elevated profit margins. This is not a secret. The CEOs of these companies tell us investors about it every three months in their quarterly financial releases and conference calls.   

It isn’t all bad news though. The silver lining is that the elevated profit margins help your investment accounts, even though they hurt your monthly budget.   

In a perfect world, the media and public officials would educate citizens so they can vote with their dollars. Until that happens, we will continue to do what we can to educate you as a consumer and an investor.   

For your convenience, here are examples of brands that we’ve identified as causing profit-led inflation:   


  • Bivens, Josh. “Profit Growth Remains a Big Driver of Inflation in Recent Years.” Economic Policy Institute. 30 March 2023
  • Donovan, Paul. “What is Profit-Led Inflation?” UBS Chief Investment Office, 16 March 2023
  • Hannon, Paul. “What is Inflation so Sticky? It Could Be Corporate Profits.” The Wall Street Journal. 2 May 2023
  • Smith, Talmon Joseph “Companies Push Prices Higher, Protecting Profits but Adding Inflation.” The New York Times. 30 May 2023
  • Storm, Servaas. “Profit Inflation is Real.” Institute for New Economic Thinking. 15 June 2023