2.3 C
New York
Thursday, November 30, 2023

McDonald’s Consumers are pushing back higher prices due to inflation concerns.

Must read

McDonald’s customers are more reluctant to add fries to their orders, grocery shoppers are less willing to swallow the higher price of Unilever’s mayonnaise, and Target customers reject some higher-priced items.

Executives from each of these companies have pointed to new trends in their recent earnings announcements or reports, pointing to their respective observations. Some consumers are bucking inflation.

Despite higher-than-normal inflation for more than two years, consumers remain resilient. Retail sales have declined in recent months but have remained well above the same period last year. Consumer sentiment rose slightly in April, but data from the Conference Board showed.

Still, consumers are starting to reject some of the higher prices as pandemic-era habits have changed and some buyers fear a recession, analysts told ABC News. Analysts were divided about shoppers’ willingness to tolerate higher food prices, but said consumers were putting off expensive purchases.

Consumer backlash may continue if the price hike continues, he added. He said the health of American households will continue to drive spending in the near term.

“Consumers generally start to slow down their spending and become a little more price sensitive,” Randy Konick, a retail analyst at financial services firm Jefferies, told ABC News.

“Inflation will continue to put pressure on the consumer’s wallet,” he said.

Consumer prices rose 5% last month from a year earlier, prolonging a month-long slump in inflation, but inflation was more than double the target rate of 2%.

However, the increase in the price of some consumer staples has been much higher than the overall rate of increase. In the last one year, there has been a jump of more than 17 per cent in the prices of flour. Cookie prices rose more than 16%, but government data shows

Overall, food prices have increased by 8.5% over the past year, which is more than 50% faster than the overall rate of increase.

Inflation has stalled despite aggressive rate hikes from the Fed, which seeks to lower prices through an economic downturn.

Jefferies’ Konik said the combination of inflation and higher interest rates is putting pressure on consumers who are facing the burden of rising prices but are facing expensive borrowing costs if they want to take loans to ease their financial pain. have to face.

Konik said resistance to higher prices was seen particularly in two items, in-store food and high-priced purchases like cars and boats.

The two groups of commodities constituted a “price-sensitive barbell,” he said, adding that repeated encounters with grocery prices at one end of the spectrum and one-time stickers for major purchases at the other end The setback caused disappointment.

Simeon Siegel, a retail analyst at BMO Financial Group, reiterated his observations of consumer intolerance towards big-ticket items and durables, tracing the current reluctance to a pandemic-era buying wave for items like exercise bikes and sofas. ,

“Everyone bought more during the pandemic,” he said. “The question is, what did they buy more of?”

“The peloton and patio furniture are big-ticket items,” he said. “No need to refill.”

But consumers have been forced to accept higher prices for repeated purchases and are still willing to do so, Siegel said.

“Somebody who bought a carton of milk and bought it multiple times,” he said.

Siegel said consumers will spend on expensive necessities in the near future. “People spend money on things they need,” he said.

But Konick said he expects a continued reduction in consumer spending on both the large and small scale.

“We’re not going to see a consumer crash,” he said. “However, inflation will remain somewhat stable and interest rates are not going to fall any time soon, so we will see them gradually being phased out.”

More articles


Please enter your comment!
Please enter your name here

Latest article