Economic commentary: Why haven't companies raised their prices?
Date
24/09/2014
What governs companies when they set prices charged to consumers? The Riksbank has wanted to gain a better picture of this in a comprehensive survey of Swedish companies. 895 companies in the retail trade, construction industry and various services industries, such as hotels and restaurants, have responded to questions about prices, costs and margins.
The survey confirms the Riksbank's earlier theory: That companies have experienced difficulty in passing on their higher costs to consumers and that their price mark-ups have therefore been lower than normal. According to the companies, this is because demand has been weak and difficult to predict. It is therefore reasonable to expect that prices will begin to rise at a faster pace as economic activity strengthens and demand increases. At the same time, companies say that competition has increased significantly in recent years, which could indicate that the low price mark-ups are partly due to structural reasons.
The results also show that larger companies have been more successful in pushing down their costs and thereby maintaining their margins.
The survey was carried out by the National Institute of Economic Research at the request of the Riksbank during early summer 2014 and is a complement to the extensive analysis work the Riksbank constantly conducts on prices.
Read more about the survey in this Economic Commentary.
Mikael Apel, Eric Frohm, Jyry Hokkanen, Christina Nyman and Stefan Palmqvist
The authors work in the Monetary Policy Department of the Riksbank and at Finansinspektionen (the Swedish financial supervisory authority).
