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MPC Minutes note that evidence on profit margins "mixed" - change from May

BOE
  • One significant change in the MPC Minutes is the subtle change in tone regarding cost pass-through. In May it had been a big theme of the press conference in particular and the Statement had included the line "Initial reports indicated that the Agents’ contacts generally expected lower pass-through of higher labour costs to prices than last year, owing to weaker demand."
  • Now, there is still the argument that "margin expansion would not add significantly to inflation" but there is also "mixed" ecidence on profit margins. Here is the new full paragraph (and note this is in the Minutes NOT the statement - the word "costs" no longer appears in the statement).
  • "Evidence on how profit margins in consumer-facing services would evolve had been mixed. On the one hand, intelligence from the Bank’s Agents suggested that consumer-facing services businesses were facing price-sensitive consumers and so would find it more challenging to maintain profit margins in the face of continuing cost pressures, including any from labour costs. On the other hand, the latest DMP survey data suggested that businesses in consumer-facing sectors, such as wholesale and retail, and food and accommodation had experienced flat or declining profit margins over the previous year and were expecting to maintain or even slightly increase these margins over the year ahead. This suggested that margin expansion would not add significantly to inflation above and beyond realised cost growth."
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