Why profit rather than pay is driving inflation

In ation has helped eurozone corporations to run up pro ts to record highs, according to research from the European Commission.

e EU executive said eurozone corporates’ pro ts contributed more to domestic in ation than wage costs last year, a pattern that is expected to continue in 2023.

Last year unit pro ts are estimated to have contributed 3.2 points to overall eurozone in ation, with unit pro ts growing at a record 9.3pc year-on-year in the nal quarter.

Unit pro ts are expected to contribute 2.5 percentage points to eurozone in ation this year, falling to 0.4 points next year.

Pent-up pandemic demand for things like electronics, healthcare, transport and travel meant those sectors were able to build up pro ts, particularly once restrictions lifted last year, the commission forecast said.

“ e strength of demand and the high in ation environment have been conducive to higher pro t margins,” the forecast said.

It warned that continued high pro ts, coupled with expected high wage demands, could “delay the process of disin ation, risk a loosening of in ation expectations, and ultimately force central banks to tighten monetary policy more than otherwise would be the case”.

But EU economy commissioner Paolo Gentiloni said rising wages should eat into qualify for the State pension currently is 66.

One in five would like to retire at the age of 50 if they could afford to leave work at that age, the survey found.

Pension proposition lead with Royal London Ireland, Mark Reilly, said, “Retiring at 60 was the most preferred option. But what was interesting was that, while people often joke of being able to retire early, the truth is that it’s not for everyone.”

Mr Reilly said this was clear from the finding that just one in five would choose to retire at 50 if the possibility was available to them. And the survey found that 8% say they never want to fully retire.

“This shows that there is a cohort of society for whom the ability to continue to work beyond the traditional retirement age is hugely important,” said Mr Reilly.

“There can be a lot of hours to fill when you retire so for many people, work gives them a sense of purpose and identity, as well as a daily routine, all of which can be lost at retirement unless ad - equate preparation is put in.”

Significant changes to the state pension were put forward by the Government last September.

The changes, which have been described as among the biggest structural reforms of the system, are due to be phased in from January of next year.