Inflation Cools Overall, but Food Is More Expensive

The Consumer Price Index released Thursday (July 11) showed that, at least overall, the pace of inflation cooled in June.

But the category-by-category data from the Bureau of Labor Statistics indicated a bump in food prices month over month — both at the grocery store and restaurants — so the consumers continually surveyed by PYMNTS are likely still finding it challenging to meet some everyday needs.

Inflation was 3% in June, measured on an annualized basis, where that rate had been 3.3% in May. On a month-over-month basis, the headline number was down 0.1%. It’s the first time that inflation has fallen since the pandemic.

But the dip primarily reflects the impact of a slide in gasoline, as gas prices fell 3.8% in June, after declining 3.6% in May, more than offsetting an increase in shelter. Shelter, for its part, was 0.2% higher in June, moderating from a 0.4% month-over-month pace seen through much of this year.

Food in Focus

The prices paid for food at home were 0.1% higher in June versus May, an uptick that reverses declining prices through much of the year, and a flat report in May. The prices for food consumed away from home — a proxy for spending money while one’s out and about, dining, perhaps with friends and family — were 0.4% higher in June, a pace that has quickened since the start of the year.

The PYMNTS Intelligence report “The Online Features Driving Consumers to Shop With Brands, Retailers or Marketplaces” found that high grocery prices are still a force to be reckoned with, as consumers across all income levels see pressure when filling their baskets to put food on the table.

The report revealed that 23% of consumers said facing higher prices with grocers is an issue. That has opened the door for some competitive inroads being made by the likes of Amazon and Walmart, which are expanding their private-label grocery offerings.

The demographics hint that low-income consumers may be feeling the pinch of higher food prices most keenly, and they are using the big-box retailers for daily sustenance. PYMNTS Intelligence found that 34% of Walmart shoppers earn less than $50,000 annually, compared to 16% of Amazon shoppers. Additionally, the study found that 30% of Walmart’s customers live paycheck to paycheck with issues paying their monthly bills, compared to 19% of Amazon’s. But even the higher earners have also been looking for value, as 35% of shoppers at Walmart earn more than $100,000 annually.

Not Much Relief at the Register

In a salvo indicating continued pressure on food and beverage sales, PepsiCo’s latest earnings results revealed that value-conscious consumers are cutting back on snacks.

Cutting back and trading down may be here for a while, no matter what the headline data on inflation might show. As far back as the beginning of the year, PYMNTS Intelligence noted that nearly two-thirds of consumers were buying items that were lower in quality and/or lower in price. Just over half of consumers said they were switching to cheaper merchants.

Low-income consumers represent 8% of retail spending, and the basics — including food and shelter — are up double-digit percentages since the pandemic. June’s reading looks unlikely to do much to offset the impact on wallets, regardless of demographics.