A key measure of corporate profitability in the euro zone rose to a record high last quarter, keeping up pressure on inflation as the long-awaited drop in business margins is delayed further, a European Central Bank (ECB) paper showed on Thursday.
Businesses jacked up prices ahead of cost increases last year to push inflation to double digit territory by the autumn, forcing the ECB into rapid rate hikes to cool demand so firms would have to relent and start absorbing higher wage demands.quick wage growth for the inflationary pressures, the GDP deflator - a measure of changes in price of all goods and services - rose to four times its historic average last quarter with profits, not wages, contributing most of this.
"The contribution from unit profits has been particularly large over the last three quarters, accounting for roughly 60% of total growth in the GDP deflator," the ECB added.
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