Prices are rising because of ‘greedflation,’ and organisations using inflation as an excuse to boost profits, according to John Glen, chief economist at the CIPS.
Speaking at the CIPS Sustainable Procurement Summit, Glen told delegates: “Greedflation is starting to emerge now, where organisations are using inflation as an excuse to increase profitability.”
Glen cited research by the European Central Bank, which found two thirds of inflationary impulses were now due to “organisations increasing their margins and increasing their profitability behind the veil of inflation.”
In a presentation containing a mixed picture of news, Glen said the UK would not enter a technical recession this year, but predicted that the economy would shrink.
He said issues facing supply chains have shifted from “logistics confusion," to trying to answer the question of "how do we actually make sure that we've got the labour supply to run our supply chains effectively?”
Despite Inflation expected to fall to 4% by the end of next year – down from record levels of 11.1% in October 2022 – Glen said traditional forms of macro-economics have failed to address the current inflationary market.
He argued economic policy has been driven too much by micro-economics, with its focus on efficiency.
The result, he said, has been that successive governments have neglected to prioritise growth, output, employment and tackling inflation.
Taking a more global outlook, Glen said that as supply chains begin to stabilise, questions over China’s position as the world’s leading manufacturer will begin to dissipate.
“Post-Covid-19, I think we're going to see the re-emergence of China – both on the supply side providing us with inputs into our production processes – and it going back to being the engine of global manufacturing,” Glen said.
He added: “On the demand side, we're going to see an expansion of Chinese consumption. We know it's in their five year plan; we know it's something that they want to deliver. The issue is that they want to deliver it by internal supply. But I think there's a massive taste for the sort of goods and services that we produce, and I think there's an enormous opportunity for us going forward.”
Theses trends, he suggested, would feed into wider conversations about deglobalisation.
“On this whole argument of deglobalisation – I'm not a big fan of it,” he said.
He added: “I think that as soon as we see supply chains start to become more secure again, we will also see the quality coming out of China or Vietnam. And I observe that firms will want to go back to those locations.”