https://sputnikglobe.com/20240227/consumer-spending-habits-are-helping-to-ease-inflation-in-the-us---report-1117003455.html

Consumer Spending Habits Helping to Ease Inflation in US - Report

Consumer Spending Habits Helping to Ease Inflation in US - Report

Sputnik International

In June 2022, the COVID-19 pandemic saw the 12-month US inflation rate hit a 40-year high at 9%, after averaging 2.2% between 2000 and 2020.

2024-02-27T05:03+0000

2024-02-27T05:03+0000

2024-02-27T06:48+0000

economy

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hyperinflation

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In June 2022, the COVID-19 pandemic saw a 12-month inflation rate hit a 40-year high at 9% in the US, after averaging 2.2% between 2000 and 2020. But consumer habits are now beating back those high inflation rates, according to a recent report, and may have helped an inflation peak of 9.1% fall to a current rate of 3.1%.The report, published on Sunday, says that consumers in the US are “fighting back” against high inflation rates in US stores. The habits that US consumers have adopted include: shifting away from name brands to store-brand items, shopping at discount stores or buying less unnecessary items like snacks and gourmet foods.More Americans are also buying used cars, as the average price of a new car reached $48,000 in March of last year, forcing some dealerships to put discounts on their new cars.JD Power data shows that average prices for vehicles fell in mid-December by 2.7% from a peak to around $46,000. But those prices are still nowhere near pre-pandemic prices due to a 26% price increase between 2020 and 2022. And some foods have fallen to below their price peaks as well, including eggs, apples and milk.This behavior contrasts that which economists saw in the 1970s and 1980s. During this time, consumers developed a paranoia that they should purchase more items in preparation for worsening inflation. This mindset itself can perpetuate inflation and lengthen the time it may take for prices to fall again.The report also noted the stark difference in pricing between popular brands and store brand items at a grocery store in Arlington, Virginia: a 12-ounce tub of Kraft’s Philadelphia cream cheese is sold for $6.69, while the store brand is just $3.19. And a 32-ounce Heinz ketchup bottle is $6.29 while the other label is just $1.69. A 24-pack of Kraft single cheese slices is $7.69, while the store label is $2.99.Together, the cost of those five brand products would equal nearly $30, while the alternatives are just $13.Quoting Samuel Rines, an investment strategist at Corbu, the report found that companies like PepsiCo, Kimberly-Clark, and Procter & Gamble have used Russia’s military operation in Ukraine as well as the rise in input costs resulting from supply-chain disruptions as an excuse to price gouge their consumers and increase their profits.But consumers who were once flush with COVID-19 pandemic stimulus checks are now exhausted by persistent inflation. They have long spent much of that money, and for some low-income consumers, have run up credit card debt and are struggling to make those payments. Now, consumers are being more cautious about their spending.The result? Companies want to please their customers, and are willing to lower their inflated prices in order to do so. The British company Unilever, which owns a number of brands known for goods ranging from ice cream to deodorant, raised their prices by 13.3% in 2022, and its sales volume fell 3.6% that same year, as a result. It then raised its prices just 2.8% last year, and saw sales rise 1.8%.The American fast food chain McDonald’s is also prepared to lower their prices in order to meet consumers with incomes below $45,000 somewhere in the middle, as they see this income bracket visiting their restaurants less and less.Inflation has been a sore spot for US President Joe Biden. As he pursues a second term in office, the primary concern that voters have is in their wallets: the economy may be improving, but inflated costs at the grocery store tend to say otherwise. The US president is reportedly weighing how hard he should hit food companies in his upcoming State of the Union Address. However, aides are advising him to focus less on the topic, as there is little that the US president can do in order to bring prices down on his own.Biden also addressed “shrinkflation”---the act of reducing the amount of product a consumer receives as opposed to the price—in his Super Bowl message in which he targeted snack food corporations. The president has also gone after “corporate greed” as the culprit for high inflation in the US. But Republicans, and even some Democrats, argue that Biden’s policies are contributing to rising inflation, and believe that the issue cannot be solely pinned on such things as “shrinkflation” or corporate greed.

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