Glance through recent earnings reports, and it looks like Americans are breezing through the barrage of price increases coming their way.
Companies including Procter & Gamble Co., Hershey Co. and PepsiCo Inc. have all seen little impact on sales from the inflation they’ve passed onto consumers to cover their own soaring costs.
But companies shouldn’t pat themselves on the back just yet. There are signs that people are starting to change their habits to deal with stretched budgets. With more price hikes expected over the coming months, this could be the beginning of shoppers pulling in their purse strings, with far-reaching consequences for manufacturers and food retailers alike.
When prices go up, consumers adapt their spending. This is known in the trade as “dialing out” inflation. So even though food prices rose by almost 7% in January, according to Labor Department data released Thursday, a bit of savvy shopping might mean grocery bills increase by only half that rate.
This dialing out is playing out in several ways. For one thing, Americans are buying less. According to data provider IRI, the dollar value of the average shopping basket has risen slightly over the past year. But the number of items in each basket has contracted.