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Approximately one in every five Americans considers rising prices to be the country's most serious economic issue. Major American firms, on the other hand, appear to be coping admirably with the most severe inflation in 40 years.
While CEOs spent much of 2021 lamenting the effect of higher wages, more expensive raw materials, and other soaring costs on their companies' performance, new data from the US Commerce Department shows that the corporations did not suffer at all. Most firms just passed these costs on to customers, sometimes even adding a little more, as corporate profits soared.
For the entire year of 2021, corporate pre-tax profits increased by 25% to $2.8 trillion. As a result of this bust, US businesses had their most successful year since 1950. Corporations' overall profit margins maintained above 13% in every quarter of 2021, a feat achieved only once in the previous seven decades.
These massive corporate profits explain why US stock markets have ignored worries about soaring inflation and, more recently, Russia's invasion of Ukraine.
Food industries, in particular, blamed price increases on pandemic interruptions, inflation, and increased consumer demand, with pork and beef up 14% and 20%, respectively. Tyson Foods, the nation's largest meat processor, made a profit of more than $1 billion in the first quarter of 2022, up 48% from the year before.
Inflationary pressures are unlikely to ease this year, costing the average household an extra $433 per month for the same products and services. Food and energy, such as gasoline and home heating, particularly are more expensive, accounting for around $2,200 of the total.
Furthermore, while American workers have benefited slightly from the economy's quick recovery from the deep recession that followed the outbreak of COVID-19 in 2020, labor data shows that wage growth has lagged increases in productivity and corporate profits for decades. For most of the last two decades, real wages have consistently lagged productivity growth, and the worker share of income has fallen, with corporate profit margins benefiting the most.
