By Jessica DiNapoli

NEW YORK (Reuters) – Federal Reserve Chair Jerome Powell said this week inflation could fall if companies curbed their profits – but the biggest U.S. retailers and consumer products makers have reported one key measure of profitability hardly budging in recent years.

Gross profit margins, watched closely by investors and measuring profits as a percentage of sales, have remained flat or slightly down at manufacturers and sellers of household basics like toilet paper and cereal.

Companies such as Tide maker Procter & Gamble Co and Walmart Inc have passed through once-in-a-generation levels of price hikes to try to keep this metric of financial health steady as they face sky-high costs.

But Powell took aim at Corporate America this week, saying if companies and shareholders took less for themselves, inflation could fall and workers’ wages may continue to rise.

Procter & Gamble’s profit margins rose through the pandemic, and then inched lower last year. Walmart’s margins have followed a similar pattern as it tries to keep prices low for consumers, and maintain traffic for its stores.

Kroger Co’s margins also rose sharply in the pandemic, as food prices have spiked.

P&G, Kroger and Walmart did not immediately return requests for comment.

P&G executives said at an industry conference last month that as inflation continues, it becomes harder to increase prices.

Executives at Walmart said last month inflation in food and consumables has persisted, with food inflation higher than what they thought it would be.

U.S. lawmakers such as Senator Elizabeth Warren and Representative David Cicilline have taken companies to task over price hikes on items shoppers buy every day.

The situation is not unique to the United States, with data shared at a recent European Central Bank retreat showing companies there are profiting from high inflation.

“Corporate profits and higher margins have been a key driver of inflation and as they start to ease we will see lower prices in real life,” said Rakeen Mabud, chief economist at progressive advocacy group Groundwork Collaborative. “What works going up, works coming down. If we see margins ease, companies bring prices down, we’ll see lower inflation.”

Some manufacturers of household goods are easing price hikes. Ketchup maker Kraft Heinz Co, Clorox Co and PepsiCo Inc have indicated they are pressing pause on further raising prices.

Clorox declined to comment, while Kraft Heinz and Pepsico did not immediately return a request for comment.

P&G and Stouffer’s frozen meal maker Nestle SA have said they are planning to continue increasing prices, even as shoppers are buying less and trimming their budgets. Nestle did not immediately return a request for comment.

Former Federal Reserve Vice Chair Lael Brainard said in the fall that retail margins – a measure of the price chains charge for a product compared to what they paid for it – have risen “significantly more” than wages for the typical store associate.

Lowering those margins could help reduce inflation pressures in consumer goods, she said.

(Reporting by Jessica DiNapoli in New York; Editing by Lincoln Feast.)

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