With U.S. gross domestic product (GDP) growing at an annualized rate of 1.1% in the first quarter, you don’t hear politicians talking much about recession. But if you take a look at what consumers are actually doing, it seems that the “R” word is happening.
During warehouse chain Costco Wholesale’s latest earnings conference call, Chief Financial Officer Richard Galanti revealed a worrying change in shopping patterns.
“Historically, we've always seen when there's a recession, whether it was '99 or '00 or '08, '09, '10, we would see some sales penetration shift from beef to poultry and pork,” he said. “We have seen some of that now.”
Some consumers are going with canned food instead because the products tend to be cheaper and have a longer shelf life.
“I think anecdotally, I heard a few months ago from our head of food and sundries buyer, that we saw some switch even to some canned products, like canned chicken and canned tuna and things like that,” Galanti said.
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While this change in customer behavior aligns with Galanti’s observations during previous recessions, the current economic climate poses an additional challenge for consumers — inflation.
Rising Food Prices
The Department of Labor reported that in April, U.S. consumer prices increased 4.9% from a year ago. While this headline inflation figure is down from its 40-year high of 9.1% last June, food costs remain a burden to many.
In particular, the food index in April was 7.7% higher compared to a year ago. The index for food at home was up 7.1% in the past 12 months, driven by a 12.4% increase in the index for cereals and bakery products and an 8% increase in dairy and related products.
The reality is that even though the Federal Reserve has implemented aggressive interest rate hikes to tame rampant inflation, consumers are stuck with paying higher grocery bills.
How To Trim Your Grocery Bills
Recessionary pressures, combined with rising price levels, are like a double whammy for American consumers. While you can leave the meat aisle and go with canned products, there are a few other things that you can do to help lower your grocery bills.
Buy in bulk: When you purchase large quantities of nonperishable items such as grains and pasta, you often benefit from a lower cost per unit. If you want to take advantage of volume discounts regularly, you can also consider joining wholesale clubs — like Costco. Just remember to store bulk items properly to maintain their quality and be careful not to overbuy perishable goods to avoid food waste.
Opt for store brands: Store-brand products frequently offer more competitive prices than their name-brand counterparts and can be just as good in terms of quality and taste. Retailers and supermarkets collaborate with manufacturers to produce these budget-friendly options. By doing so, they cut out expensive marketing and advertising costs often associated with name-brand products.
Limit prepared foods: Prepared foods can be a time saver, but they can also be more expensive than cooking from scratch. Whether it’s pre-chopped vegetables or pre-made meals, they tend to have a higher cost per serving because you are paying for the convenience and packaging. By choosing whole ingredients and cooking your meals at home, you can save money and gain more control over what goes into your food.
Inflation chips away at the value of your hard-earned money. While using strategies to counter rising food costs, you might also want to safeguard your purchasing power through inflation-resistant investments. Nowadays, a variety of such investment options are easily accessible to retail investors.
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