From Tide to Slim Jims, consumers are cooling their spend — but rates could keep heating up
Reaching for the grocery-brand peas… After years of stimulus-fueled spending sprees, consumers are finally starting to pump the breaks. Last month, US retail sales posted their biggest monthly drop since 2021 as shoppers cut back on holiday splurges. From McDonald’s to Amazon, most companies have hiked prices to offset higher costs. But as consumers rein in spending, the hiking spree could lose steam:
- Pantry staple Conagra said it plans to stop raising prices for kitchen faves like Chef Boyardee, Slim Jims, and Birds Eye — but that could change if inflation sticks.
- Booze giant Constellation Brands has raised prices of brews like Corona and Modelo more than usual, but is planning “more muted” increases this year as demand slows.
- Aisle all-star Procter & Gamble saw sales and profit fall last quarter while shoppers cut back on price-hiked brands like Tide, Charmin, and Crest as they opted for cheaper alts.
Charging it to the card… Despite stubborn inflation, consumer spending has stayed strong during the pandemic — thanks partly to padded stimulus savings. But Americans are running out of cash, and a fifth of adults say their monthly expenses are higher than their earnings. US credit-card debt is at an all-time high, and the personal-savings rate fell to a 17-year low in October. Meanwhile, big biz leaders like Chase’s Jamie Dimon and Elon Musk are warning of a global recession this year.
It could get worse before it gets better… While spending’s slowing and prices are finally cooling, inflation’s not where the Fed wants it to be (read: still abnormally high). Plus, the labor market is still going strong. While the central bank has started to reduce the size of rate hikes, officials like Fed Chair Jerome Powell doubled down on their hawkish stance last week. A quarter-point hike is expected next month, and it could take until the end of the year (or later) for the Fed to actually start cutting rates.