Inflation is causing significant changes in how Americans, especially black consumers, shop. The impact of these shifts in consumer behavior is becoming a crucial factor in curbing inflation.
High inflation rates for everyday necessities like shelter and food have risen sharply. Shelter has increased by 30% and food prices have increased by 8.5% making it especially challenging for the majority of individuals and families.
With prices averaging about 19% higher than pre-pandemic levels, frustrated consumers are pushing back against what they see as unwarranted price hikes.
In grocery stores, Black consumers are making strategic changes, such as opting for store-brand items, exploring discount stores, and even cutting back on purchases like snacks and gourmet foods.
This consumer resistance extends to the automobile market, with more Americans choosing used cars over new ones, prompting dealers to reintroduce discounts on new vehicles. However, the most evident pushback is against price gouging in essential goods like food, paper towels, and napkins.
In recent months, consumer resistance has prompted large food companies to respond by significantly slowing down their price increases from the peaks of the past three years. Although this may not revert grocery prices to levels of a few years ago, it is expected to contribute to easing overall inflation, which has dropped from a peak of 9.1% in 2022 to 3.1%.
Customers at McDonald’s have also expressed frustration over the rising prices of menu items, with some items reportedly costing more than expected. Viral stories about expensive meals, including an $18 Big Mac meal in Darien, Connecticut, have fueled the discontent.
CEO Chris Kempczinski had addressed McDonald’s “affordability” problem, and indicated the chain would cut prices on some menu items. Kempczinsk acknowledging the impact of rising prices on lower-income consumers mentioned a decrease in customers making $45,000 or less in the most recent quarter.
Public frustration with rising prices has become a central issue in President Joe Biden’s re-election campaign. Despite a significant decline in inflation, polls reveal that many consumers, particularly in black communities, remain dissatisfied with prices remaining significantly higher than pre-inflation levels.
Biden, echoing the sentiments of left-leaning economists, has criticized corporations for raising prices more than necessary, boosting their profits. The White House has also taken issue with “shrinkflation,” where companies reduce the quantity inside a package instead of increasing the price. Biden, in a video released on Super Bowl Sunday, denounced shrinkflation as a “rip-off.”
Economists suggest that consumer pushback against high prices, especially from black communities, could further ease inflation. This sets apart the current inflation situation from the prolonged price spikes of the 1970s and early 1980s. In situations of persistent high inflation, consumers tend to accelerate their purchases before costs rise further, perpetuating inflation.
Lower-income consumers are running up credit card debt and spending more cautiously. Companies, like Unilever, have adjusted their strategies, raising prices less in response to consumer reluctance.
Officials at the Federal Reserve highlight consumers’ growing reluctance to pay high prices as a crucial factor in the expected steady decline of inflation back to the 2% annual target. Surveys indicate that companies were already slowing price hikes before recent criticisms of price gouging.
