Harris stubbornly aims for high prices

(Reuters) – Vice President Kamala Harris' speech in Raleigh, North Carolina, on Friday will focus on economic issues, particularly her plans to cut costs and combat “corporate price gouging” if she is elected president, according to her campaign team.

Inflation is a constant sore spot for American consumers, overshadowing an otherwise healthy economy with a strong labor market. Prices initially rose quickly due to supply shortages resulting from the COVID-19 pandemic, but then the rapid recovery in consumer demand gave companies the opportunity to continue raising prices even as supply conditions improved.

But now consumer price inflation is slowing after a series of sharp interest rate hikes by the Federal Reserve. But U.S. shoppers are still feeling the effects of increases in the cost of everyday goods in recent years.

The inflation shock drove up housing and food costs so much that they are now significantly higher than would have been expected if price trends had remained the same. However, the rise in inflation was not felt everywhere: the costs of medical services are now slightly below the trend.

Recent quarterly reports suggest that higher interest rates are causing Americans to cut back on spending on expensive purchases and switch to cheaper items to save money. Against this backdrop, government data also shows that margins for retailers and wholesalers have fallen sharply from very high levels when inflation was at its highest.

Still, overall operating margins for companies in the S&P 500 Index – which are among the largest U.S. companies – remain above the pre-pandemic trend, but that's not the case across all sectors. Margins for companies that provide communications services – from wireless contracts to home entertainment – are among the highest compared to the pre-COVID decade.

The Biden administration accuses companies of “shrinkflation,” meaning they keep prices the same but reduce the volume of packaged goods – which leads to an increase in margins.

The Biden administration, like several states, argues that market concentration in some sectors is a force that limits consumer choice and thus exacerbates inflation.

In fact, the White House has intervened to prevent a merger between grocery giants Kroger and Albertsons. Several states, especially in the western United States, have joined the effort to prevent the deal.

(Reporting by David Gaffen and Dan Burns; additional reporting by Savyata Mishra; editing by Jonathan Oatis)