denpamioenpnaJWP/23/131IMFWorkingPaperspasoJiqaJasaeJouindJo6Jassq(\uaeu\uoJ)s(enpeJaduqIisuap\oaIioi\oomman\senp\oanoouJe6apaqe\a.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.2023INTERNATIONALMONETARYFUND2?2023InternationalMonetaryFundWP/23/131IMFWorkingPaperEuropeanDepartmentEuroAreaInflationafterthePandemicandEnergyShock:ImportPrices,ProfitsandWagesPreparedbyNiels-JakobHansen,FrederikToscani,andJingZhouAuthorizedfordistributionbyOyaCelasunJune2023IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.ABSTRACT:Wedocumenttheimportanceofimportpricesanddomesticprofitsasacounterparttotherecentincreaseineuroareainflation.Throughanovelconsumptiondeflatordecomposition,weshowthatimportpricesaccountfor40percentoftheaveragechangeintheconsumptiondeflatorover2022Q1–2023Q1,whiledomesticprofitsaccountfor45percent.Theincreaseinnominalprofitswaslargestinsectorsbenefitingfromincreasinginternationalcommoditypricesandthoseexposedtorecentsupply-demandmismatches.Whiletheresultsshowthatfirmshavepassedonmorethanthenominalcostshock,andhavefaredrelativelybetterthanworkers,thelimitedavailabledatadoesnotpointtoawidespreadincreaseinmarkups.Lookingahead,assumingnominalwagegrowthofaround4.5percentover2023-24–slightlybelowthelevelseeninQ12023–andbroadlyunchangedproductivity,anormalizationoftheprofitsharetotheaveragelevelover2015-19willbenecessarytoachieveaconvergenceofinflationtotargetoverthenexttwoyears.Monetarypolicywillthusneedtoremainrestrictivetoanchorexpectationsandmaintainsubdueddemandsuchthatworkersandfirmssettleonrelativepricesettingthatisconsistentwithdisinflation.RECOMMENDEDCITATION:Hansen,Niels-Jakob,FrederikToscani,JingZhou.2023.“TheRoleofImportPrices,ProfitsandWagesintheCurrentInflationEpisodeintheEuroArea”IMFWorkingPaper23/131,InternationalMonetaryFund,Washington,DC.JELClassificationNumbers:E31,E24Keywords:Inflation;Wages;Profits;TermsofTradeAuthor’sE-MailAddress:NHansen@,Ftoscani@,Jzhou@WORKINGPAPERSINTERNATIONALMONETARYFUND3PreparedbyNiels-JakobHansen,FrederikToscani,andJingZhou11WearegratefultoOyaCelasunforherguidanceandsupport.WealsothankSilviaAlbrizio,JorgeAlvarez,ChristianBogmans,RomainDuval,NirKlein,GeoffGottlieb,RuiMano,Pierre-OlivierGourinchas,MirkoLicchetta,AndreaPescatori,JorgeMirandaPinto.AlexandreBalduinoSollaci,andseminarparticipantsandreviewersattheIMFfortheirveryhelpfulcommentsandsuggestions.INTERNATIONALMONETARYFUND41.INTRODUCTION_______________________________________________________________________________52.DECOMPOSINGTHEGDPDEFLATOR________________________________________________________73.DECOMPOSINGTHECONSUMPTIONDEFLATOR__________________________________________11ONSFORPROFITABILITYANDTHEDISTRIBUTIONOFINCOME5.IMPLICATIONSFORTHEINFLATIONOUTLOOK____________________________________________166CONCLUSION__________________________________________________________________________________18REFERENCES_________________________________________________________________________201.DecompositionofChangeintheGDPDeflator____________________________________________________________82.SectoralProfit______________________________________________________________________________________________83.ComparisonofGDPDeflatorIncreasetoPreviousEnergyPriceShocks___________________________________94.ComparisonofEuroAreaGDPDeflatorDecompositionwithOtherMajor_______________________________105.DecompositionofChangeintheConsumptionDeflator_________________________________________________126..AccountingfortheContributionofProductivitytoInflation______________________________________________137.IncomeSharesandRealWageandProfit_________________________________________________________________148.ProfitabilityIndicators_____________________________________________________________________________________159.CountryCharacteristicsandIncreaseinUnitProfit________________________________________________________1610.IllustrationofInflation,WageandProfitProjections____________________________________________________18INTERNATIONALMONETARYFUND51.IntroductionTheincreaseinfirmprofitsintherecentinflationepisodehasbeencatchingtheattentionofeconomiccommentatorsandpolicymakersacrossadvancedeconomies.Despitesomecross-countryheterogeneity,therehasbeenapatternofprofitsperunitofoutput(unitprofits)beinganimportantcounterparttotheincreaseintheGDPdeflatorinadvancedeconomiesoverthepasttwoyears.Policymakershaveconsequentlypivotedintheircommunicationtohighlighttheroleofprofitsforinflationalongwiththeroleofunitlaborcosts.Forexample,ECBexecutiveboardmemberPhilipLaneinaninterviewwithReuterspointedto“extraordinaryunitprofits”,andECBexecutiveboardmemberFabioPanettaraisedtheriskofaprofit-pricespiralinaNewYorkTimesinterview.2FormerIMFchiefeconomistOlivierBlanchardhaspointedoutthatdistributionalconflict–beitdrivenbystrongaggregatedemandortheinitialdesireofoneeconomicactortoincreaserelativepricesrelativetoothers–cangenerateinflationaryprocesses.Againstthisbackground,ourpaperinvestigatestheroleofprofits,wages,andimportpricesintherecentepisodeofhighinflationintheEuroArea.Wecontributetothedebatebydisentanglingtheroleofimportprices,profits,andwagesininflationintheeuroarea.Focusingontheconsumptiondeflator,weaddtheroleofimportpricestothenowwell-knownGDPdeflatordecomposition.Tosetthescene,weconfirmthatunitprofitsintheeuroareahaveincreasedsharplyandarethemaincounterparttotheincreaseintheGDPdeflator.Theprofitincreasewaslargestinminingandutilitiesbutwasalsosignificantinagriculture,construction,manufacturing,andcontact-intensiveservices.AccountingexplicitlyfortheimportpriceshockthroughaconsumptiondeflatorratherthanGDPdeflatordecomposition,wefindthatimportpricesaccountdirectlyfor40percentofinflationonaveragesince2022.Buttheroleofdomesticprofitsremainssignificant,accountingforjustbelow45percentandlaborcostsfor25percentofinflation.Nettaxeswereslightlydisinflationaryovertheperiodandthuscontributednegatively.Whilenominalprofitshaveincreased,thisisnotnecessarilytrueforprofitability.Ourresultsimplythatfirmshavepassedonmorethantheimmediatenominalimportcostshock.Giventheincreasingprofitshareofgrossvalueadded,firmshavesofaralsobeenrelativelymoreshieldedfromtheadversetermsoftradeshockthanwageearners.Butthisdoesnotnecessarilyimplythatprofitability(themarkuporprofitmargin)hasincreased.AnalysisbyeconomistsattheBankofItaly(Colonnaetal.,2023)carefullylaysouttherelationshipbetweenprofitshareandmarkupandillustratestheconditionsunderwhichtheycanmoveinoppositedirections.TheyalsoshowthatdataforGermanysuggestsmarkupsinindustryandinmanufacturingremainedconstantin2022,butincreasedinconstruction,retail,accommodation,andtransport.InItaly,markupsin2022wereessentiallyatpre-pandemiclevels.Ourownreadingofthelimitednationalaccounts-baseddatafortheeuroareaisconsistentwiththis,pointingtobroadlyconstantratherthanincreasingprofitability.Howcomefirmshavebeenrelativelymoreshieldedfromtheshockthanworkers?Onereasonisthatpricesaremoreflexiblethanwages—firmsareabletoadjustpricesquicklytoshieldtheirprofitabilitywhilewageissubjecttomorerigiditiessuchasbeingsetbypreviouswagenegotiations.Thegrowingliteratureontheroleforprofitsisgenerallyalignedwithourfindingthatfirmshavefaredrelativelybetterthanworkersevenintheabsenceofalargeincreaseinmarkups.Fortheeuroare,amongothers,authorsfromtheEuropeanCentralBank(Arceetal.,2023)andEuropeanStabilityMechanism(Capolongoetal.,2023)aswellastheEuropeanCommissioninitsSpring2023forecasthaveshownthatunitprofitsrosesignificantlyin2022,leadingtoanincreaseintheprofitshare.Unitprofitincreaseshavebeen2https://www.ecb.europa.eu/press/inter/date/2023/html/ecb.in230228~c78d1f2ca5.en.htmlandhttps://www.ecb.europa.eu/press/inter/date/2023/html/ecb.in230401~ec65174af7.en.htmlINTERNATIONALMONETARYFUND6concentratedinsectorsexposedtointernationalcommoditypricesanddemand-supplymismatches.TheanalysismostcloselyrelatedtoourownistheworkpresentedinspeechesbytheBankofEngland’sDhingra(2023)andHaskel(2023)whichthroughsomewhatdifferentmethodologiesdecomposeinflationintodomesticprofits,wages,taxesandimportedprices(splittingoutenergycostsandotherimportedpricesinDhingra’sapproach).Whiletheresultsdiffersomewhatbetweenbothapproaches,bothcautionagainstanoversimplisticinterpretationwhereanincreaseingrossoperatingsurplusisinterpretedascorporateprofitsbeingthelargestdriverofinflation.HaskelfindsalargerrolefortermsoftradeforeuroareainflationthanintheUKandUS,withmagnitudesbroadlycomparabletoourownworkfortheeuroarea.Ontheimplicationsforprofitabilityandwhetherapositivemarkupshockhasbeenacausaldriverofinflation,workbytheIMFintheOctober2022WorldEconomicOutlook,doesnotfindabroad-basedincreasemarkupforadvancedeconomiesin2021.Atthecountrylevel,inadditiontoColonnaetal.(2023),Gloveretal(2023a)findthatmarkupsin2021increased3.4percentintheUS,contributingsignificantlytotheincreaseininflation.Inafollow-uppiece,Gloveretal.(2023b)showthatthecontributionofprofitstoinflationeasedintheUSin2022,andthatthepatternhasbeeninlinewithpreviouseconomicrecoveries.WerningandLorenzoni(2023)presentaconceptualframeworkwhichcanbeusedtothinkaboutinflationasamanifestationofconflict–disagreementaboutrelativeprices–betweeneconomicactors.Inthecontextofalargeimportpriceshockastherootcauseofaninitialincreaseinprices,forexample,thiscanleadtoageneralizedincreaseininflationasagentssequentially(duetonominalrigidities)adjustpricesdependingontheirinflationexpectations.Blanchard(1986)isanimportantcontributiononcostpushinflation,whereworkersattempttomaintaintheirpurchasingpowerfollowinganinitialerosionleadingtofurtherinflation.Thiscanbeausefulangletointerprettheconsumptiondeflatordecompositionwepresent.Itsuggeststhatinlinewithhistoricalevidence,anaccelerationinlaborcostsislikelyahead.Fromamoregeneralperspective,ourpaperislooselylinkedtothestrandofliteraturewhichanalyzesprofitabilityandmarketpowerusingfirm-leveldata(e.g.,DeLoeckeretal(2020),Davisetal(2022))butwefocusonnationalaccountdata.Illustrativesimulationsshowthatacompressionintheprofitsharetohistoricnormswilllikelybenecessarytoachievethedisinflationaryprocessunderplausiblewagegrowthassumptions.Westartbyestimatingthatthetermsoftradecontributenegativelytoinflationintheeuroareaoverthenexttwoyears–ontheorderofonepercentagepointin2023basedontheassumptionsunderlyingtheApril2023IMFWorldEconomicOutlook.Wealsoassumethattherewillbenocontributionofnettaxestoinflationandthatlaborproductivitywillremainbroadlyflatinthenextcoupleofyears.Undertheseassumptionsweareabletomapinflationoutcomesintheprofitshare-nominalwagegrowthspaceusingourconsumptiondeflatordecomposition.Thisexerciseshowsthataveragenominalwagegrowthofaround4.5percentover2023-24isconsistentwiththeinflationprojectionsintheApril2023WorldEconomicOutlookfortheeuroarea–whichshowinflationconvergingtotargetinearly/mid2025–ifprofitsharesreturntotheaveragelevelof2015-19byend-2024andlaborproductivityremainsbroadlyunchanged.Shouldwagesincreasemoresignificantly–forexample,inastaticsensewagegrowthofaround5.5percentwouldensurethatrealwagesreturntotheirpre-pandemiclevelbyend-2024–inflationwouldbenotablyhigherunlesstheprofitsharecompressestothelowestlevelsincethemid-1990s.Itisthenincumbentonpolicymakerstoanchorexpectationsandsupportcoordinationamongeconomicactorsonalowinflationequilibriumsuchthattherecoveryinrealwagesoccursatameasuredpaceandfirmsacceptacompressionintheprofitshare.Thepaperproceedsasfollows.First,itlaysoutthestandardGDPdeflatordecompositionwhichhasreceivedmuchattentionoverrecentmonths.Itcomparesthecontributionofunitprofits,unitlaborcosts,andunittaxestodayintheeuroareawithhistoricalevidencefromthe1970soilpriceshocksaswellaswithothermajoreconomies.Second,theanalysismovesclosertounderstandingthedynamicsofHICPbyproposingadecompositionoftheconsumptiondeflator(whichlikeHICPbutunlikeGDPincludesimportsbutexcludesINTERNATIONALMONETARYFUND7exports).Third,wediscusswhattheresultsimplyforprofitability.Fourth,weanalyzeimplicationsfortheinflationoutlook.Thefinalsectionconcludes.2.DecomposingtheGDPDeflatorInthissection,weexploitthatGDPfromtheincomesidecanbewrittenasthesumoflaborcompensation,grossoperatingsurplus,andnettaxes.ItiswellknownthatGDPfromtheincomesidecanbewrittenasGDP=GVA+NetTaxes=PTofits+CompensationofEmployees+NetTaxes(2.1)FromthisitfollowsthattheGDPdeflator(nominalGDPdividedbyrealGDP)canbeexpressedasthesumofunitlaborcosts,unitprofitsandunitnettaxes.=GDPDeflatoT=UnitPTofits+UnitLaboTCost+UnitTaxes(2.2)Whilethisaccountingidentifydoesnotallowforanycausalinterpretation,itshowshow(changesin)theGDPdeflatorisreflectedinprofitsperunitofrealGDP(unitprofits),laborcompensationperunitofrealGDP(unitlaborcost),andtaxeslesssubsidiesperunitofGDP(unittaxes).ToexploittheGDPdeflatordecompositionidentity,werelyonnationalaccountsdata.Thenationalaccountsreportprofitsasgrossoperatingsurplusandmixedincome.Operatingsurplusmeasuresthesurplusordeficitaccruingfromproductionbynonfinancialandfinancialcorporations,government,households,andnonprofitinstitutionsservinghouseholds.Mixedincomeisthesurplusordeficitaccruingfromproductionbyunincorporatedenterprisesownedbyhouseholds.Grossoperatingsurplusdiffersfromprofitsshownincompanyaccountsforseveralreasons.Onlyasubsetoftotalcostsaresubtractedfromgrossoutputtocalculatethegrossoperatingsurplus.Essentiallyitisgrossoutputlessthecostofintermediategoodsandservicestogivegrossvalueadded,andlesscompensationofemployeesandtaxesandsubsidiesonproductionandimports.Itisgrossbecauseitmakesnoallowanceforconsumptionoffixedcapital(CFC).Foreaseofnotation,wewillrefertogrossoperatingsurplusandmixedincomeasnominalprofitsthroughoutthispaper.Profitsperunitofoutputdivergedsharplyfromtheirpre-pandemictrendinrecentquartersandwerethemaincounterpartstotheincreaseintheGDPdeflatorin2022(Figure1).Between2000and2019,unitprofitscontributedslightlylesstotheGDPdeflatorthanunitlaborcosts,withaminorroleforincreasingtaxes.2020and2021sawhighvolatilityincomponents,inpartduetothetemporarypandemictaxcuts,evenastheGDPdeflatorincreasedbyasteady3percentinbothyears.In2022,theGDPdeflatoracceleratedsharply,withbothunitlaborcostsandunitprofitsrisingsignificantlyaboveaveragesinrecentyears.Unitprofitscontributedthelargestshareoftheincrease.ThelatestavailabledataatthetimeofwritingwasQ12023,showingafurtherincreaseinboththecontributionofunitprofitsandunitlaborcostsrelativetothe2022average.INTERNATIONALMONETARYFUND8gureEuroAreaDecompositionofChangeintheGDPDeflatorUnitprofitsincreasedinagriculture,construction,miningandutilities,manufacturingandcontact-intensiveservices.Theminingandutilitiessectorsawthelargestincrease,whilesomesectorssuchasprofessionalsandpublicadministrationremainedbelowpre-COVIDlevels(Figure2).LookingintermsofcontributionstototalGDPdeflatorinflationsince2022,trade,travel,accommodationandfood—withasignificantincreaseinunitprofitandasizableshareintotalgrossvalueadded—sawthelargestincreaseintheirshare.Similarchangealsoappliestominingandutilities,whopreviouslycontributedanegligiblesharetoGDPdeflatorinflation,nowwasresponsiblefortwotenthsoftheaverageinflationbetween2022Q1and2023Q1.Onthecontrary,manufacturing,whichusedtocontributeaquartertotheGDPdeflatorinflationinthelastdecade,onlyaccountedforaroundonetenthoftheinflation.roAreaSectoralProfitINTERNATIONALMONETARYFUND9TheTheincreaseintheGDPdeflatorfollowingthecurrentenergyshockhasbeencomparableinmagnitudetothefirstoilpriceshockofthe1970s,butthecompositionhasbeendifferent.Followingthefirstoilpriceshockin1973–spurredbytheOrganizationofthePetroleumExportingCountriesoilembargo–thegrowthintheGDPdeflatorrosemarkedly,drivenalmostexclusivelybyacceleratinglaborcostswhileprofitsfell(Figure3,leftpanel).3Laborcostsalsoplayedmoreofaroleduringthesecondoilpriceshockin1979–triggeredEuroArea:GDPDeflator(Percent,year-on-year)86420UnitTaxUnitProfitUnitLaborCostTotal1971Q11973Q41974Q31976Q21978Q11980Q41981Q31983Q21985Q11987Q41988Q31990Q21992Q11994Q41995Q31997Q21999Q12001Q42002Q32004Q22006Q12008Q42009Q32011Q22013Q12015Q42016Q32018Q22020Q12022Q4bythetemporaryreductioninoilsupplyamidtheIranianrevolution–althoughtheoverallincreaseintheGDPdeflatorgrowthwassmallerinthatepisode(Figure3,middlepanel).ThemagnitudeofthecurrentincreaseintheGDPdeflatorinflationrateiscomparabletothefirstoilpriceshock(Figure3,rightpanel),albeitfromamuchlowerstartinglevelofinflation(textchart).Profitshaveplayedalargerrolethanlaborcostssofarinthecurrentepisode(Figure3,rightpanel).However,duringallthreeepisodestherelativecontributionfromlaborcostsgrewovertime.Thisisconsistentwiththenotionthatfirmscanpassonhigherinputscostmorepromptly,whileittakesalongertimeforwagestoadjust(thewageadjustmentswerelargeafterthefirstoilpriceshockoncetheykickerinafteraboutthree-fourquarters,likelyduetoexplicitindexationarrangementsandlessanchoredexpectations).Theresultinginitiallylowerrealwageswouldincentivizemorehiring,eventuallyalsopushingupwages.Thus,anincreaseintherelativecontributionfromwagesduring2023wouldbeconsistentwiththehistoricalevidenceandtheory.FigureEuroAreaComparisonofGDPDeflatorIncreasetoPreviousEnergyPriceShocksSources:OECD;Eurostat;theAreawideDatabase;IMFstaffcalculations.RelativetotheUSandCanada,theincreaseintheGDPdeflatorintheeuroareahasrecentlybeenmoretiltedtowardsprofits.InCanadaandtheUnitedStates,theaccelerationintheGDPdeflatorstartedearlierandwasmorebiasedtowardshigherlaborcosts(Figure4).Onayear-on-yearbasistheGDPdeflatorhasdeceleratedinbothcountriesinthesecondhalfof2022.IntheeuroareaandtheUK,ontheotherhand,theGDPdeflatoracceleratedpreciselyinthesecondhalfof2022,withalargeroleplayedbyprofits.Thiscouldpartlyreflectthedifferentnatureofshocks,withtheshockinNorthAmericabeingrelativelymoredrivenbydemand(andapositivetermsoftradeshockin2022)whiletheadverseenergyshockplayedanimportantroleintheeuroareaandUK.TakingalongerperspectivetounderstandthecumulativeGDPdeflatorchangeover3Nominal(unit)profitsincreasedsharplyintheyearsjustbeforetheoilpriceshock(1971-1973).Theoutsizedroleoflaborcosts'followingtheoilshockmightthushavepartlybeenareactiontothisincrease.INTERNATIONALMONETARYFUND10boththepandemicandenergyshockperiod(Q42019toQ42022),showsthatprofitsplayedthelargestroleintheEuroAreainrelativeterms(Figure4).42016Q42017Q12017Q22017Q32017Q42018Q12018Q22018Q32018Q42019Q12019Q22019Q32019Q42020Q12020Q22020Q32020Q42021Q12021Q22021Q32021Q42022Q12022Q22022Q32022Q4UnitprofitsUnittaxUnitlaborcost2016Q42017Q12017Q22017Q32017Q42018Q12018Q22018Q32018Q42019Q12019Q22019Q32019Q42020Q12020Q22020Q32020Q42021Q12021Q22021Q32021Q42022Q12022Q22022Q32022Q4UnitprofitsUnittaxUnitlaborcostTotalUnitedStates:GDPDeflator(Percent,year-on-year)Sources:OECD;Eurostat;theAreawideDatabase;IMFstaffcalculations.Notes:FortheUnitedStates,thebarsdonotsumuptothefulldeflatorgrowthineachquarter,asprofits,nettaxes,andlaborcostheresumtogrossdomesticincome.4IMF(2022)hadaboxwithasimilarexerciseoncontributionstocumulativeGDPdeflatorchanges,however,theperiodcoveredwas2019q4-2021q4.INTERNATIONALMONETARYFUND113.DecomposingtheConsumptionDeflatorConceptually,theGDPdeflatordoesnotprovideafullpictureoftherecentepisodeofsurgingconsumerpriceinflationsinceitincludesexportpricesandexcludesimportprices.Onaverage,differentmeasuresofpricechangesintheeconomysuchastheGDPdeflator,thetotalconsumptiondeflatorandHICP/CPIinflationtendtoco-moveclosely(textchart).However,attimesoflargeterms-of-tradeswingstheycandecouple,andthishasbeenthecaseovertherecentyears.ThelinkbetweentheconsumptiondeflatorandHICPdevelopmentsistighter,sincetheybothincludeimportpricesofconsumergoodsandunliketheGDPdeflatorexcludeexportprices.Usingasetofsimplifyingassumptions,consumerpriceinflationcanbedecomposedintocontributionsfromdomesticprofits,labor,foreign,andnettaxes.AssumethattheproductionfunctiontoproducetotalconsumptionisCobb-Douglas,withweight入jsforvalueaddedfromcountryjsectors(∑j,s入js=1).Thecostminimizationproblemforproduceris:qjsmin∑pjsqqjsj,ss.t.∏(qjs)入js=1j,sTheresultingproducercostforoneunitoftotalconsumptionisequalto()入jsandtheshareofthecostofgoodsfromcountryjsectorsinthetotalcostamountsto入js.Assumingthatretailertakesaconstantmarkup(correspondingtoaconstantelasticityofsubstitutionbetweengoodsinconsumer’sutilityfunction),thenthedynamicsofconsumptiondeflatorinflationmimicthoseofproducerpricescombinedwithasalestaxT.p=(1+p=(1+T)∏()j,sConsumptiondeflatorinflationcanbewrittenas:lnp?ln=∑j,s入js(lnpjs?lns)+ln(1+T)?ln(1+)(3.1)where?denotesvalueofagivenvariableinthelastperiod.Essentially,(lnpjs?lns)canbecalculatedfromtheGVAdeflatorinflationofcountryjsectors,whichcanbedecomposedintolaborcompensation(L)andprofit(F)usingrealGVA(y)andgroupedintodomesticprofit,domesticlaborcompensation,andforeign.Lnpjs?lns=LjsLsyjsysyjsys??+FjsFsyjsysyjsys??(3.2)contributionfromlaborcontributionfromprofitThedecompositionofconsumptiondeflatorinflationneedsfoursetsofdata.First,nominalandrealsectoralGVAtocalculatesectoralGVAdeflatorinflation.Second,sectoralnominallaborcompensation(or