Corporate Profit Margins Rise Amid Consumer Price Sensitivity Decline Despite widespread consumer complaints about rising prices, companies have managed to increase price markups and expand profit margins, according to a recent analysis by Goldman Sachs. The research highlights a growing disconnect between inflation concerns and consumer spending behavior, which has allowed corporations to maintain strong earnings growth even as households grapple with higher costs. Goldman economists point to studies showing that corporate markups—the difference between prices and marginal production costs—have risen significantly over the past few decades. They note that after-tax corporate profits as a share of value added have roughly doubled since the late 1980s, rising from about 5% to over 10%. This trend is attributed to both falling production costs and shifting consumer behavior. While some of the markup growth can be explained by declining costs, the broader implication is that consumers are paying more than ever for goods and services, even as inflation remains a persistent issue. The analysis also explores why consumers have not pushed back against these price increases. Goldman researchers cite studies indicating that price sensitivity among households has declined, particularly as incomes have risen. Higher incomes raise the opportunity cost of time, leading consumers to spend less effort searching for cheaper alternatives. This trend has made wealthier households less responsive to price changes, allowing firms to raise prices without losing significant market share. Economist Kunal Sangani’s work is highlighted as a key factor in this shift.#goldman_sachs #kunal_sangani #u_s_labor_market #corporate_profit_margins #consumer_price_sensitivity
