business news in context, analysis with attitude

The Wall Street Journal offers an assessment of the current state of the US economy.  Some critical points from the story:

•  "Consumers’ short-term outlook on the U.S. economy reached the lowest point in nearly a decade, the Conference Board’s latest consumer-confidence survey showed. A separate survey of consumer sentiment fell to its lowest point on record."

•  "Higher prices are denting consumer spending, the economy’s main engine. U.S. household spending eased to its slowest pace this year in May, the Commerce Department said."

•  "Weakness in spending appears to have since continued: Outlays at retailers slightly deteriorated in early June compared with the end of May, according to credit- and debit-card spending figures from data company Earnest Research."

•  "Cutbacks in consumer spending threaten to weigh on U.S. economic growth, which is flashing signs of slowdown. Many forecasters are increasingly fearful that the economy could fall into a recession under the weight of rising inflation and the Federal Reserve’s attempts to curb it through aggressive interest-rate hikes."

•  "Consumers across income levels have cut their spending in recent weeks. Workers who earn less than $100,000 annually curtailed their spending at the fastest pace of all income groups between late May and the week ended June 15, according to Earnest.

Consumers spent less at sit-down restaurants in the week ended June 15 compared with a year earlier, Earnest data show.

"As restaurant costs surge, consumers are finding little relief at grocery stores, where prices for food jumped 11.9% in May from a year earlier, the biggest increase since 1979. As a result, grocery shoppers are shifting their spending habits, after splurging on higher-end groceries and food delivery in 2020 and 2021. For example, Whole Foods customers are switching to lower-price species of fresh fish, according to its operating chief."

KC's View:

Seems to me that this is a perfect time for food retailers to do something we often talk about here on MNB - become more than just a source of product, but also a resource for consumers.

In this moment, that means providing some level of education to shoppers about how to stretch their money … helping them figure out how to make meals that meet their aspirations while not spending more money in restaurants … and taking an approach that stresses that value is not always the same as low price.  People may want to spend less money, but they also want more value for what they do spend.

This won't be a short-term effort.  The broad expectation that the current period of inflation will be followed by a period of recession.  This will affect customers and employees, and this will be a perfect time to create a sense of community around the food store experience.

By the way .. the National Retail Federation (NRF) last week challenged conventional thinking about recession, suggesting that while "the US economy is slowing … consumers remain financially healthy and the nation is unlikely to enter into a recession during the remainder of 2022."

National Retail Federation Chief Economist Jack Kleinhenz said, “I am not betting on an official recession in the near term, but the most recent research pegs the risk over the next year as about one in three and it will be touch and go in 2023.  In the meantime, a contracting economy short of a recession is not out of the question.

“Regardless of the prospect of a downturn or whether it will meet the threshold of a recession, the consumer outlook over the next few months remains favorable,” Kleinhenz said. “The economy is moving away from extremely strong growth toward moderate growth, but increased income from employment gains, rising wages and more hours worked is expected to support household spending. Policy issues will likely be the deciding factor shaping the economic outlook this year and next.”