cost-push inflation

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Related to Cost push inflation: Demand pull inflation

Cost-push inflation

Inflation caused by rising prices, usually from increased raw material or labor costs that push up the costs of production. Related: Demand-pull inflation.
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Cost-Push Inflation

Inflation caused by rising costs of production. For example, if the price of a barrel of oil rises significantly, this could cause fuel prices to increase which, in turn, increases costs for transportation of food, tools, and other goods, which can cause some level of inflation across an economy. Cost-push inflation contrasts with demand-pull inflation, which is caused by a rise in demand on the part of consumers.
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cost-push inflation

Rising consumer prices caused by businesses passing along increases in their own costs for labor and materials. Cost-push inflation does not necessarily result in rising corporate profits because businesses may be unable to pass through all of their cost increases. Compare demand-pull inflation.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

cost-push inflation

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

cost-push inflation

a general increase in PRICES caused by increases in FACTOR INPUT costs. Factor input costs may rise because raw materials and energy costs increase as a result of world-wide shortages or the operation of CARTELS (oil, for example) and where a country's EXCHANGE RATE falls (see DEPRECIATION 1), or because WAGE RATES in the economy increase at a faster rate than output per man (PRODUCTIVITY). In the latter case, institutional factors, such as the use of COMPARABILITY and WAGE DIFFERENTIAL arguments in COLLECTIVE BARGAINING and persistence of RESTRICTIVE LABOUR PRACTICES, can serve to push up wages and limit the scope for productivity improvements. Faced with increased input costs, producers try to ‘pass on’ increased costs by charging higher prices. In order to maintain profit margins, producers would need to pass on the full increased costs in the form of higher prices, but whether they are able to depends upon PRICE ELASTICITY OF DEMAND for their products. Important elements in cost-push inflation in the UK and elsewhere have been periodic ‘explosions’ in commodity prices (the increases in the price of oil in 1973, 1979 and 1989 being cases in point), but more particularly ‘excessive’ increases in wages/ earnings. Wages/earnings account for around 77% of total factor incomes (see FUNCTIONAL DISTRIBUTION OF INCOME) and are a critical ingredient of AGGREGATE DEMAND in the economy. Any tendency for money wages/earnings to outstrip 99 underlying PRODUCTIVITY growth (i.e. the ability of the economy to ‘pay for/absorb’ higher wages by corresponding increases in output) is potentially inflationary. In the past PRICES AND INCOMES POLICIES have been used to limit pay awards. At the present time, policy is mainly directed towards creating a low inflation economy (see MONETARY POLICY, MONETARY POLICY COMMITTEE), thereby reducing the imperative for workers, through their TRADE UNIONS, to demand excessive wage/earnings increases to compensate themselves for falls in their real living standards.

The Monetary Policy Committee, in monitoring inflation, currently operates a ‘tolerance threshold’ for wage/earnings growth of no more than 4-1/2% as being compatible with low inflation (this figure assumes productivity growth of around


Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
The peculiarity of an opponent of cost push inflation also being an opponent of the Phillips curve provokes a couple of further thoughts about Gifford's view of inflation.
By imposing higher taxes on sugar, milk, soft drinks, garments, cooking oil, cement etc would result in a cost push inflation and such a move should have been avoided particularly when most of these goods are used by common man.
This is generally a cost push inflation in a possible range of 1%-1.4% headline inflation." Confidence could be affected by a long term dispute.
Depreciation has made exports more competitive, hence obviously have become more expensive that causes reduction in demand for exports and cost push inflation as well.
If imports are a significant part of the consumption basket, there will be cost push inflation. However, it is possible that retailers may not pass the price increases onto consumers but lower their profit margins.
Low rate of return on saving instruments together with average double digit inflation in the country reduce supply of credit in loanable funds market and whatever meagre credit available for private sector, in such a grave environment when the government also demand for credit, the rate of lending surges and thus whatever credit remain for private sector goes to in producing output which demand is relatively inelastic consequently cost push inflation spiralled and remaining economic sectors recessed.
If the government withdraws the 5th Schedule, it would result in cost push inflation and a fresh wave of price hike would hit the general public, he said.
A tight policy stance may not directly address supply-side pressures, as it acts as a barrier to a spill over from cost push inflation to more generalised and entrenched set of inflationary pressures.
He further stated that tariff reduction unless coupled with strategic planning would lead to cost push inflation. Commenting on some of the steps needed to revive the economy, Mr.
This would trigger cost push inflation and also increase the cost of doing business which will make Pakistani products further uncompetitive in the world market.
The scenario of Inflation consistency appears very interesting, initiation of inflation starts with demand pull inflation (from 2004), and cost push inflation took over the place with almost at end of the demand pull, creating significant decline in the economic growth (from 2008).
"There is a real danger of continuing cost push inflation. The costs of production are increasing due to a high share of imported inputs whose costs are increasing because of a continuously depreciating exchange rate, rising energy prices and higher financial charges.