The blog has been a bit quiet of late, while I've been travelling and working in the UK. However, the real world doesn't stop while you're travelling, and I note that the media have continued their crusade against 'greedflation' while I'm away. In the latest instalment, the New Zealand Herald's Front Page podcast reported last week:
Numbers crunched by the independent cost comparison site PriceSpy show that the impact of inflation is not uniform across all companies.
The data shows that some companies are definitely increasing prices much faster than their competitors, often at a far higher rate than overall inflation figures indicate.
Figures released by Stats NZ showed inflation sitting at 6.7 per cent for the year to March, down from 7.2 per cent in December.
Despite this, the pricing data released by PriceSpy across a number of popular categories showed that some products had increased by as much as 29 per cent when comparing January to May in 2022 and 2023 respectively.
By definition, inflation is an increase in the general price level. That doesn't mean that every price goes up, only that prices are going up in general terms. It should be self-evident that price rises are not exactly the same for all goods and services at all times, and that price rises are not the same for all substitute goods within a particular category at all times. In fact, if all firms increased their prices exactly in concert with each other, we should be deeply concerned about collusion in the market, and no doubt the Commerce Commission would take a dim view of that behaviour.
So, given that firms don't all raise prices at the same time or by the same amount, it should be easy to identify some goods or brands that have risen in price more than others. That is all that PriceSpy has done. They could do this any year, whether inflation is higher or lower, and show something similar. That some firms raised prices more than others isn't evidence of 'greedflation'. It is an observation of the normal way that firms change the price of their products (as I have noted before). If you really believe that there is greedflation, then you need to show that price rises aren't resulting primarily from increases in input costs. PriceSpy hasn't done that (but more on that point in my next post).
And to make matters worse, there is this misunderstanding:
“Our research suggests that inflation may not be the sole factor driving price points up, as we are increasingly seeing competing manufacturers up their prices at differing rates, not only to each other but in comparison to the rate of inflation,” [PriceSpy head of public relations] Lindholm says.
This is proof that you shouldn't get your head of public relations to talk about economics. Inflation doesn't cause prices to go up. Inflation is a measure of how much prices have gone up, in general (on average, if you like). It's like saying that your car's speed is causing your car to go faster.
Anyway, coming back to the original point of this post, I'm still not seeing a lot of convincing evidence for greedflation in New Zealand. The analysis by PriceSpy certainly isn't it.
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