Inflation may be cooling. But, for most Americans, the price of a cup of coffee or a bag of groceries hasn’t budged.
Cotton, beef and other commodities have gotten cheaper. And shoppers found deeper discounts online and at malls during the holiday season, as retailers tried to clear through excess inventory. Consumer prices fell 0.1% in December compared with the prior month.
Sticky contracts, higher wages
During the early days of the Covid pandemic, Americans went on spending sprees at the same time that factories and ports shuttered temporarily. Containers clogged up ports. Stores and warehouses struggled with out-of-stock merchandise.
That surge in demand and limited supply contributed to higher prices.
Freight costs and container costs have eased, bringing down prices along the rest of the supply chain. The cost for a long-distance truckload was up 4% in December compared with the year-ago period, but down nearly 8% from March’s record high, according to Labor Department data.
Annual hourly earnings have risen by 4.6% over the past year, according to the Bureau of Labor Statistics — not as high as the consumer price index’s growth in December.
Yet in some categories, softening demand has translated to price relief. Several hot pandemic items, including TVs, computers, sporting goods and major appliances have dropped in price, according to Labor Department data from December.
Budget pressures for families
Top retail executives said they expect families’ budgets will still be under pressure in the year ahead.
At Procter & Gamble, for example, executives plan to increase prices again in February. Prices on P&G’s consumer staples like Pampers diapers and Bounty paper towels have climbed 10% compared with the year earlier, while demand slipped 6% in its latest quarter.
In other cases, companies are still dealing with factors that contributed to inflation. For example, farmers are raising cows, but have fewer than before the pandemic, and grains and corn are less plentiful as the war in Ukraine continues, according to McMullen.
“If before you were spending $80 and now you’re spending $90 [on groceries], I think you’re going to be spending $90 for awhile,” he said. “I don’t think it’s going to go back to $80.”
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