Contribution of profits and wages to inflation

There is much focus on the contributions of profits and wages to inflation. In this analysis, we look at how profits and wages contributed to domestic price pressures in the period up to the end of 2022. We not only look at gross profits for the total economy, but we also distinguish, within gross profits, the contributions from depreciation and amortisation, as well as firms’ net profits and households’ net profits (which includes income from self-employment). We also quantify the contributions of gross profits and labour costs to price growth by industry. Using the same data, we can also show the development of the profit margin. These are statistical decompositions of the deflator of value added; without providing any indications the underlying economic dynamics.