Greedflation is the new term used to describe when companies use inflation as an excuse to boost their profit margins.
It is regarded as a cynical move by businesses, especially when consumers are struggling with a cost of living crisis.
And the European Central Bank has warned that it is monitoring rising profits "closely".
Is greedflation happening in Ireland?
In the past week, supermarkets reduced the price of milk and butter, which led to calls on the Government to examine price caps across essential food items.
Labour TD, Ged Nash, said it was good news for shoppers but essentially confirmed that "price gouging is endemic throughout the grocery sector in Ireland".
The party's finance and enterprise spokesperson said the Government must commit to working with the CCPC to stamp out this greedflation once and for all.
"These big and brave supermarkets must also commit to meaningful price reductions across the range of other products that they are using to cream it in."
Retail Ireland, the Ibec group that represents the retail sector, said there has been no indication that retailers' profit margins have increased as a result of inflation.
"If anything what has happened in many instances is Irish retailers delayed passing on increases in their supply chain to Irish consumers," said Director of Retail Ireland, Arnold Dillon.
However, the next meeting of the Retail Forum - which includes supermarkets and representative groups - has been brought forward, such is the concern in Government about the issue.
In calling for the forum to be convened "as soon as possible", Taoiseach Leo Varadkar is reported to have told a Fine Gael parliamentary party meeting that "grocery prices must come down if their input costs come down".
Let's take a look at the figures
According to data published by the Central Statistics Office, modified domestic demand increased by 10.4% in the last three months of 2022, compared to the same period the previous year.
Over the same period profits of domestic owned enterprises (not the multinationals) increased by 17.7%
The wage bill of domestic companies increased 6.6%, and the Consumer Price Index was up 8.8%.
Economist, Austin Hughes, said normally, economists would expect profits to act as a ‘shock absorber’ but these numbers instead suggest they have been a ‘shock amplifier’.
"So, at the aggregate level, domestic companies profits expanded substantially last year, providing prima facie evidence of margin widening and, hence a case to be answered in relation to ‘profiteering’ or ‘greedflation’," he explained.
"Obviously, these ‘macro’ data don’t tell us how many firms are taking advantage of an environment where ’everything is getting dearer’ but the scale of profit increase hints at a fairly widespread problem."
Is it deliberate or unintentional?
The ECB increased interest rates for the seventh time on Thursday, in their ongoing efforts to bring down the rate of price increases.
We are living in an era of high inflation, and businesses are negotiating how they operate in these times.
Companies need to make a profit to survive. They have to ensure that they remain viable, and so they cannot let their costs rise more than their prices.
They have also been operating in the dark, forecasting by how much their costs will go up in an inflationary environment. Their forecasts, like the weather, might not always be accurate.
Firms don't know if their costs will go up by 2% or 22% and may decide to raise prices by 10% when it turns out, costs only went up by 6%.
This is unintentional, according to Mr Hughes. "The reason I say unintentional is because a company may not know in advance that their costs are going to go up."
Companies need to cover themselves, however, "some of them have covered themselves more than handsomely".
"Some companies have acted as an amplifier rather than an absorber, some of that is accidental or unintentional and some of it you probably would describe as never wasting a crisis, and pumping up their margins a little bit," Mr Hughes said.
Retail Ireland's Director said Irish food inflation is significantly below the EU average.
"Irish retailers have a track record of reducing prices and keeping costs to households low," Mr Dillon said.
"Irish grocery price inflation has been much lower than trends across Europe over the last ten years, which is driven by intense competition in the sector."
He pointed to the price volatility seen in the global commodities market. Prices of food and drink have increased by 27% since March 2021 across the EU.
"Ireland has experienced among the lowest overall increase in prices (16.6%) with Irish retailers seeking to protect consumers from commodity cost increase."
Mr Dillon said Irish retailers are taking measures to reduce costs where possible. He said average grocery retail margins are traditionally much lower than others in the supply chain.
The same rebuttal will no doubt be offered at the Retail Forum, likely to take place this week.
What are the repercussions for companies who amplified prices?
The ECB has warned that it is closely monitoring potential price gouging of consumers.
It said it was paying just as close attention to trends in profits as to wages.
The minutes of an ECB meeting in February noted, "Profit growth remained very strong, which suggested that the pass-through of higher costs to higher selling prices remained robust.
"It was therefore widely stressed that developments in profits and markup warranted constant monitoring and further analysis on an equal footing with developments in wages."
At the very least, companies that have been seen to have transgressed will gain a bad reputation.
What business would want to be known for profiteering at a time when people's disposable income is stretched?
They may also face more intrusive regulation and corporate oversight. Retailers that attend the Retail Forum will be reminded of consumer protection powers which allow for the setting of price caps.
"Consumer watchdogs may need more teeth in terms of naming and shaming with price comparisons on their website," Mr Hughes said.
"It is time now, to the extent that part of it is willful; you would hope and expect that those companies would start bringing down prices."
