2023/Q3 Article 11. Pass-through of rising production costs to the selling prices of non-financial corporations in 2022
Series: Economic Bulletin.
Author: Roberto Blanco Escolar, Dmitry Khametshin, Álvaro Menéndez Pujadas and Maristela Mulino Ríos.
The surge in energy and other commodity prices in 2021 H2 and a significant part of 2022 has led to firms’ costs increasing considerably. This article analyses how this rise in costs has been passed through to selling prices and what impact it has had on firms’ output, wages, employment and unit labour costs.
- On average, firms passed through a significant proportion of production cost increases to selling prices in 2022, albeit with a high degree of heterogeneity across sectors.
- In sectors that have historically seen more rigid pricing (proxied by lower price volatility), pass-through of rising costs to selling prices has been slower.
- Rising input prices directly cause selling prices and unit labour costs to grow. The latter is a consequence of the negative effect on labour productivity, owing to the adverse impact on output and the lack of an impact on personnel costs.
- In any case, these direct effects, which are stronger in the sectors most exposed to this shock, do not account for the indirect (general equilibrium) effects that influence all sectors.