If Inflation Is Coming Down, Why Are Prices Still So High?

You might have read with excitement the latest economic reports that show inflation is finally starting to show some real signs of a decrease. But when you went out to eat or filled up a cart at the supermarket, chances are you didn’t find the financial relief you were looking for.

What’s going on?

There are many factors that contribute to the rise and fall of consumer prices. While we often hear about the forces of supply and demand, there’s more than a little opportunism at play on the part of businesses that set those prices.

Bloomberg’s Tracy Alloway explained the phenomenon using the descriptive term “excuseflation.”

The strategy isn’t new and in the past, it’s been referred to as “price over volume,” but there’s some evidence that its use is especially widespread in today’s uncertain economic situation.

As Alloway explained: “So you’re selling fewer products, but you’re selling them at higher prices. It’s a viable strategy in the current environment.”

Supply and demand are still moving prices … but businesses are artificially keeping supply low in order to pad their own profits.

Ain’t no thing but a chicken wing

Although this “excuseflation” can rear its ugly head in just about any industry, Alloway cited a popular American food as a prime example. Specifically, she explained how the Wingstop chain used market forces to its advantage to ensure the cost of chicken wings remained elevated.

There were a number of legitimate issues that kept supply low — from labor shortages to supply chain interruptions to illnesses that killed off a large number of chickens.

Many of those issues are now in the rear-view, but that doesn’t mean that Wingstop (or its many competitors) are quickly reducing their inflated prices.

Instead, they’re acting in unison — like a monopoly — to continue charging more.

Chris Agee April 18th, 2023

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