This is the most logical answer to the raising prices. Inflation is caused by two major factors – supply and demand.
Supply Low + Demand High = High Inflation
Supply Low + Demand Low = Minimal Inflation
Supply High + Demand High = Minimal Inflation
Supply High + Demand Low = Gradual Inflation
As we know that primary sectors such as Mining, Agriculture, & Logging have not seen reduction in their resources – what is under the ground or grow on it is not affected by economic or geopolitical factors. And the workforce is back on track, so there is no shortage of labour either. We can safely assume that goods can be produced to meet demand and it has been meeting demand. You can check your local grocery stores and see no empty shelves.
What about the demand part? Once again, the demand is not high as consumers have exhausted their savings, interest rate has been raising and spending has been low.
But the prices keep going up. We know this because we can arbitrarily decide to increase our prices. Or in most cases we increase our prices because everything is costing us more. Albeit it takes time to normalise prices but this is happening too fast.
It is similar to a bank run. When panic sets in, everyone runs to get their money out. So, when every one is increasing their prices, I will too. This just feeds the cycle and no one benefits except the primary (raw materials) and secondary (manufacturing) industries.
These companies have the same cost as before – materials are the same price and labour salary is not increasing. So, they have no reason to no capitalise on this.
And that is where the economy suffers leading to recessions.
Citation:
https://edition.cnn.com/2023/03/29/investing/premarket-stocks-trading/index.html
