Conclusion
Firms’ pricing power may change over time, resulting in markup fluctuations. In this Letter, we examine whether increases in markups played an important role during the inflation surge between early 2021 and mid-2022 and if declines in markups have contributed to disinflation since then. Using industry-level data, we show that markups did rise substantially in a few important sectors, such as motor vehicles and petroleum products. However, aggregate markups—the more relevant measure for overall inflation—have stayed essentially flat since the start of the recovery. As such, rising markups have not been a main driver of the recent surge and subsequent decline in inflation during the current recovery.
What people are referring to is the ~1.5% "Sticky Inflation" that's keeping the measure from getting near the 2% Fed goal...and the profit margin data of several major firms bears this out.