Inflation driven by profits in few sectors, including oil and gas: report
Global News
The oil and gas sector tops the profitable list by far with a $38-billion increase in profits, or more than 1,000 per cent, since 2019.
A new report by the Centre for Future Work found that growth in corporate profits this year compared to pre-pandemic has been concentrated in a small number of sectors where consumer prices have also risen the fastest.
Report author and economist Jim Stanford analyzed the profits of the 52 business sectors tracked by Statistics Canada, and found that just under a third of these sectors were responsible for driving overall corporate profits up. Combined after-tax profits in the 15 most profitable sectors grew by 89 per cent during the most recent 12-month period compared to the four quarters before the pandemic hit.
Meanwhile, profits in the other 37 sectors tracked by Statistics Canada fell during the same period. Among all sectors combined, profits were up almost 30 per cent.
After-tax corporate profits in 2022 so far make up 17.4 per cent of Canada’s GDP, the highest share in history, Stanford said.
The oil and gas sector tops the profitable list by far with a $38-billion increase in profits, or more than 1,000 per cent, since 2019. Other highly profitable sectors included mining, which saw profits rise by almost 700 per cent, banking, real estate, building products, motor vehicle dealers, grocery stores and food manufacturing.
In fact, the report said that large price increases on eight specific products sold or produced by those sectors accounts for more than half of overall inflation in the past year, based on Statistics Canada data.
Stanford said he found this number “startling.”
“Both the concentration of profits in those sectors, and the concentration of price pressure in products produced by both sectors, really shows that this is not a generalized overheating problem,” he said.