A new research paper from the Centre for Future Work sheds new light on the role of surging corporate profits in driving higher Canadian inflation.

The report provides details on net income in 15 super-profitable private-sector industries in Canada, based on newly released data from Statistics Canada. It compares the most recent 12-month period to profit levels before the pandemic (in 2019). Combined profits in those 15 sectors grew by 89%, rising by a total of $143 billion. In contrast, profits in the other 37 business sectors tracked by Statistics Canada fell over the same time.

The oil and gas industry experienced by far the largest increase in profits: up by over 1000% since 2019, adding an extra $38 billion to corporate coffers in the last 12 months. But other key sectors also experienced massive increases in profits: including banking, real estate, mining, building products, motor vehicle dealers, grocery stores, and food manufacturing.

Not coincidentally, those 15 sectors (recording the strongest increases in profits) were also the source of the fastest price increases experienced in Canada since 2021. Products like gasoline, groceries, mortgage interest, home energy products, and building materials have led the acceleration of inflation – and those higher prices flow directly into the record profits recorded in those 15 sectors. Large price increases for just 8 specific products sold by those super-profitable sectors account for over half of the rise in Canadian prices in the latest 12-month period; without those 8 products, overall Canadian inflation would be one-third lower.

Aggregate business profits have surged during the pandemic to their highest share of Canadian GDP ever. Profits grew three times faster than wages since 2019 – yet Bank of Canada officials continue to focus on an “overheated” labour market and rising wages as the source of inflationary pressures. Worse yet, Bank of Canada policy aims to suppress wages through higher unemployment (achieved via higher interest rates), while ignoring the role of profits in driving price inflation. Better appreciation of the role of record profits in pushing up inflation would inform a more balanced policy response.

Please see the full report, 15 Super-Profitable Industries Fuel Canada’s Inflation, by Jim Stanford.