High prices are forcing consumers to ask: Can I live without them? 2022-05-01 06:00:01


A pedestrian carries shopping bags in the Herald Square area of ​​New York, US, on Wednesday, April 13, 2022.

Kala Kessler | Bloomberg | Getty Images

Sandy Magni is planning to take her teenage daughter to West Palm Beach, Florida this summer, though Air ticket prices are going up.

It won’t come cheap, but Magni doesn’t want to miss out on visiting her family. A 40-year-old semi-legal who lives in the Bronx and works in the financial district of Manhattan, finds that there are other things she can do without.

“I bring more lunch,” she said. “I can make coffee in the office.”

Magni is one of the millions of people who started transferring her money two years after the Covid-19 pandemic. Consumer prices rose in Fastest clip In four decades. The cost of everything from housing to lattes is rising, which begs the questions: When and where do consumers cut spending?

Some companies are already feeling the impact as they try to pass on higher costs to customers.

AmazonThe latest quarterly sales grew in slower pace Since 2001 dot com bankruptcy. Netflix Subscribers lost in the last quarter for the first time in more than a decade. video game maker Activision Blizzardhome appliance giant whirlpool And 1-800-Flowers All reported weak sales last quarter.

Meanwhile, companies from stronghold to McDonald’s to Kraft Heinz to United Airlines I mentioned that it is flexible the demand As consumers maintain spending Although the prices are high.

Changes in consumer behavior are putting some executives on edge.

“We think the consumer will spend,” MessiCFO, Adrian Mitchell She said in JP Morgan’s retail report last month. “But are they going to spend on discretionary things we sell, or are they going to spend on a plane ticket to Florida, travel, or going to restaurants more?”

coca cola CEO James Quincey He told CNBC Last week, clients were not “never swallowing up inflation”.

Consumer spending, as measured by the Commerce Department, rose 1.1% seasonally adjusted in March. Spending remains strong even among low-income families with annual incomes below $50,000, according to Bank of America data. (The data excludes households without access to cards.)

But consumer confidence, a measure of shoppers’ sentiments about market conditions cited by The Conference Board, fell in April.

“We’re not really seeing many signs of a slowdown, despite the concerns that are happening in the market,” said Anna Chu, US economist at Bank of America.

One reason is the amount of money people looted during the pandemic. On average, low-income families have $3,000 in savings and checking accounts — nearly double what they had at the start of 2019, according to internal Bank of America data. This gave consumers a back-up, Zhou said, even when they pay more at the gas pump and the grocery store.

Only the good stuff

Many customers not only spend, but find themselves increasingly willing to show off, whether on a pair of high-end products fibrousJeans or a first-class seat on a Delta Airlines Flight.

Apple on Thursday reported a ‘Standard level of promotions’ During the first three months of the year, users chose the more premium iPhones, but were wary of the impact of the shutdowns in China. And with automakers raising prices to reflect the tight inventory of global supply chain issues, car seekers have no fear.

stronghold Chief Financial Officer John Lawler said this week that despite the price increases, the company is still seeing exceptionally strong demand for its latest products, ranging from the Maverick pickup truck, which starts around $20,000, to the Mustang Mach-E electric crossover, which Can be used in top decorations. It cost a lot more than $60,000. It’s already sold out for 2022.

united, delta And Southwest Airlines be Predict 2022 Profits thanks to seemingly insatiable customer demand after two years of a brutal pandemic, both for leisure and business travel. Their employment restrictions prevent them from flying more.

The average price of a domestic round-trip ticket in the United States for travel between Memorial Day and Labor Day was $526, up more than 21% from 2019, according to data from Airlines Reporting Corp. from travel agencies.

“The demand environment is the strongest in the industry in 30 years,” United Airlines CEO Scott Kirby said on April 20 profits release.

Travelers walk through Terminal A at Orlando International Airport on Christmas Day, Saturday, December 25, 2021.

Stephen M. Doyle | Orlando Sentinel | Getty Images

Levi Strauss & Co CEO Chip Berg told CNBC last month that despite the higher prices, consumers were not trading on the cheapest denim. Levy reiterated his forecast for fiscal year 2022, which calls for revenue growth between 11% and 13% over the previous year.

But there are signs that consumer appetite may be approaching its limits.

Domestic US airline bookings in the first two weeks of April fell 2% compared to the previous two weeks, the first decline during that timeframe this year, according to Adobe Analytics. In March, bookings were up 12% from 2019, but customer spending on those tickets was up 28%.

Restaurant traffic in March fell 1.7%, according to industry tracker Black Box Intelligence. Fine dining, casual and upscale family restaurants saw the biggest jump in sales growth, but sectors are still trying to recover from the pandemic lows.

Judy Klobus, a 58-year-old mother of three and grandmother of four who lives outside Albany, New York, told CNBC that she and her husband, a retired New York City police officer, go out to dinner twice a week. Now that their meals and everything else cost more, it’s down to twice a month.

“I feel it in the pocket,” Klobus said.

Coming Challenges in 2023

There are other looming risks that could hinder consumer spending, even if the impact is not immediate. rentals march higher The property taxes are not fully compensated The skyrocketing rise in house values.

The Federal Reserve aims to tackle inflation through raise interest rates. This translates to Higher borrowing costs for homebuyers and credit card users.

In the fourth quarter, US credit card balances rose by $52 billion, the largest quarterly jump in 22 years for New York Federal Reserve data, but still down $71 billion from the end of 2019.

US credit card delinquency rates have risen to 1.62% from a more than three-decade low of 1.48% in the second quarter of last year, still far from the 6.6% peak reached in the first quarter of 2009, which is the end of the tail The great. Recession, according to the Federal Reserve Bank of St. Louis.

“For this year, consumer spending should remain resilient,” said Chu, an economist at Bank of America. “For next year, it’s less certain – certainly as the second half of next year approaches, the risks of a further slowdown could emerge in the consumer.”

I am only complaining about the prices.

Cindy Maher

Bloomfield, Connecticut

Boeing Chief Executive Dave Calhoun said Wednesday that demand for new aircraft from airlines is recovering thanks to renewed demand for travel. However, it is unclear whether Americans will continue to squander flights in the coming months or if they will reach the point where they will cut back.

“In that second year, when inflation starts hitting consumers’ pockets, that’s when those numbers really start to affect us,” Calhoun said in an interview with CNBC’s “Squawk on the Street.”

Right now, many consumers, like Cindy Maher, 58, who owns a leadership development consultancy and lives in Bloomfield, Connecticut, feel comfortable enough to maintain their spending habits.

“I’m not cutting back,” she said. “I’m just complaining about the prices.”

Maher said she noticed about 7 loaves of bread and it cost $70 to fill her car tank. But, she said, in her dual-income family, she can afford these costs.

“My heart goes out to those who have low-paying jobs,” she said.

– CNBC channel Amelia Lucas And John Roseveer Contribute to this article.