The Competition and Markets Authority tells us that increased prices - beyond increased inpout prices - on branded goods increased inflation. This is not obviously true.
But they claim it:
But the evidence collected by the CMA indicates that, over the last 2 years, around three-quarters of branded suppliers in products such as infant formula, baked beans, mayonnaise, and pet food have increased their unit profitability and, in doing so, have contributed to higher food price inflation.
The problem here is that they also claim the following:
However, own label products often provide cheaper alternatives with suppliers of these products earning lower profit margins and competing to win and retain contracts from retailers. In all but one of the relevant product categories the CMA looked at, as food prices have risen, many consumers have switched away from brands towards own label alternatives, or reduced their consumption, leading to a decline in brands’ market shares and profits. This switching is positive for competition and allows those able to switch, to lessen the impact of high food price inflation.
Aaaah. No. For that second is substitution. The price of one good - branded baked beans - rises so consumers substitute away to unbranded or supermarket own. So much so, as they say, that total profits and sales by the branded goods have fallen.
Now, if inflation was the counting of the same goods over the years then this makes no difference. But inflation isn’t that for inflation takes account of substitution.
From the ONS:
Within each calendar year, the basket contents are fixed so that changes in the indices from month to month reflect only changes in prices, and not variations in the quality and quantity of items purchased.
However, the contents of the basket and associated expenditure weights are updated annually. This is important in helping to avoid potential biases that might otherwise develop, for example, because of the development of entirely new goods and services. These procedures also help ensure that the indices reflect longer-term trends in consumer spending.
The substitution away from those higher priced branded goods (now priced even higher) to own brand is already included in our inflation statistics. Because the consumer basket has changed in order to reflect those changes in buying habits.
Just one of those things that bolsters our long running insistence that it’s not possible to have enough knowledge to run an economy in detail. Hayek got there before us of course. But this is a good example of the point. The very people trying to work out the effects of inflation upon food prices aren;t accounting for one of the effects of inflation upon food prices.
This isn’t going to then produce the information necessary for detailed economic management, is it?