As shown in Chart 6, limits to shortterm supply elasticities meant that the recovery in demand enabled firms to also increase profit margins in those sectors exhibiting supply-demand mismatches. To the extent that supply capacity should improve over time and demand patterns normalise, the extraordinary conditions underpinning profitability in 2022 should not persist, with a decline in profit margins translating into lower inflationary pressures.
Chart 6 Sectoral wage and profit developments (left: change since 2019 Q4 to 2022 Q3; right: gross operating surplus over real value added, level)  Sources: Eurostat, and ECB staff calculations. Notes: Wages refer to compensation of employees, profits to gross operating surplus. Income for self-employed people is included in wages. Latest observations are for 2022 Q3..