The U.S. Bureau of Economic Analysis reported that American corporations collected $4 trillion in profits in 2024, more than double their 2010 total. Corporate profit margins hit 16.2 percent of national income by the end of 2024, up from the 13.9 percent average of the decade before the pandemic. When inflation peaked and then eased, grocery prices did not come down at the same pace. The companies keeping prices high had learned, during a genuine supply crisis, how much they could charge. Then they kept charging it.
Profits as the Engine of Inflation
The Groundwork Collaborative, analyzing Bureau of Economic Analysis data, found that corporate profits drove 53 percent of inflation during the second and third quarters of 2023, and more than one-third of all price increases since the start of the pandemic. Over the 40 years before 2020, corporate profits drove just 11 percent of price growth.
General Mills attributed a 16.5 percent increase in profits in fiscal year 2022 directly to "getting smart about how [they] look at pricing." PepsiCo raised prices across snacks and beverages by roughly 15 percent per quarter in late 2022 and early 2023 while increasing its margin. PepsiCo's CFO told investors the company "may, in fact, increase margins during the course of the year" as their costs decreased. The inflation of 2020-2022 was a genuine supply-side shock. What followed was companies that had found the ceiling keeping prices close to it.
"Corporate profits drove 53 percent of inflation during the second and third quarters of 2023, per the Groundwork Collaborative, compared to an 11 percent historical norm over the prior four decades."
The St. Louis Federal Reserve Bank confirmed the concentration in a 2025 analysis of BEA data. Profits from domestic nonfinancial industries, which averaged 8.1 percent of national income in the decade before the pandemic, had risen to 11.2 percent by late 2024. About 76 percent of that profit growth flowed directly to shareholders in the form of dividends. Retail and wholesale trade, construction, manufacturing, and health care drove 73 percent of the postpandemic rise in corporate profits.
Smaller Packages, Same Price, Bigger Margin
The Government Accountability Office documented a second mechanism in a 2025 report: shrinkflation. Analyzing 2021-2023 consumer purchase data across thousands of grocery items in seven categories, the GAO found that while fewer than 5 percent of items in each category were downsized, those items made up a disproportionately large share of dollar sales. In the cereal category alone, just 1.1 percent of items representing 8.6 percent of total cereal sales were downsized.
The contribution of product size reductions to inflation ranged from 1.6 percentage points for cereal to 3.0 percentage points for household paper products such as paper towels. The GAO found that consumers tend to be less responsive to package size reductions than to equivalent price increases. Subtle packaging changes are harder to detect than a higher price tag, and food companies have used that gap to widen margins.
The Case for a Regulated Market
The history of centrally administered prices provides a clear cautionary note. The Soviet command economy, which set prices by decree rather than market signals, produced chronic shortages and collapsed under its own inefficiency. Venezuela's attempt to enforce price caps on food and medicine without addressing supply created empty shelves within months. Suppressing prices by government mandate destroys the information markets provide and the competition that drives quality improvement.
The regulated alternative demands considerably less. Senator Bob Casey's Shrinkflation Prevention Act would direct the FTC to classify deliberate product-size reductions without proportional price cuts as an unfair or deceptive trade practice. The Price Gouging Prevention Act, introduced by Senators Warren, Baldwin, and Casey, would authorize the FTC to pursue price increases that outpace cost increases during market disruptions.
Unit pricing requirements at retail, already standard across most of Europe, let consumers compare across package sizes without back-of-envelope arithmetic. Stronger antitrust enforcement addresses the underlying condition: when four or five dominant companies control a food category, there is no competitive pressure to pass input-cost savings on to buyers. That is a structural market failure, and the appropriate response is structural market repair.
Antitrust law, the FTC, and the Federal Reserve exist precisely because unregulated markets, concentrated in too few hands, extract wealth from households and route it to shareholders. The BEA data from 2020 to 2024 shows what that extraction looks like in practice: $4 trillion in annual profits, smaller packages on the same shelf, and grocery prices that by the end of 2024 had not returned to pre-pandemic levels despite three years of declining input costs.
Sources
- Groundwork Collaborative: "Inflation Revelation: How Outsized Corporate Profits Drive Rising Costs"
- Fortune: "Consumer Prices Pushed Up Mostly by Corporate Profits, Groundwork Collaborative Study Finds" (January 2024)
- U.S. Bureau of Economic Analysis: Corporate Profits Data
- St. Louis Federal Reserve Bank: "What's Driving the Surge in U.S. Corporate Profits?" (April 2025)
- U.S. Government Accountability Office: "Consumer Prices: Trends and Policy Options Related to Shrinking Product Sizes" (July 2025)
- The Hill: "Inflation Eases as Corporate Profits Fall from Record Levels"
- Congress.gov: Shrinkflation Prevention Act of 2024 (S. 3819)
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