Some major brands have reported quarterly earnings in recent days: What do they say about consumer spending and the direction of the economy?
DEBBIE ELLIOTT, EDITOR:
Changes may be coming to your store. People are upset about the high price of chips, laundry detergent, you name it. And now prices are the talk of the business world these days as a long list of household products report their earnings to investors. NPR’s Alina Selyukh is here with the latest news. Hello. Thanks for being on the show.
ALINA SELYUKH, BEHIND: Thank you.
ELLIOTT: So you’ve been listening to all these earnings calls. Give us a break.
SELYUKH: Well, the companies I listen to are some of the giants like Coca-Cola, Unilever, Kimberly-Clark, Colgate-Palmolive. And another big takeaway is that companies know very well that you hate their high prices, and they’re starting to feel it. They see people like Ariane Navarro of Houston choosing boutique brands over the big names she used to buy.
ARIANE NAVARRO: We used to buy Bounty and Charmin. Now it’s like it doesn’t matter. We are very attached to the Kirkland brand, which is a Costco brand, and Amazon Basics.
SELYUKH: So these big conglomerates are now saying, maybe we have to cool it down on the pricing issue. I don’t want to say that there is a big talk about lowering prices for good, but certainly talking about reducing price increases and doing other promotions, so maybe like discounts or prices. You know, everyone’s favorite – buy one get one free kind of thing.
ELLIOTT: All right. That’s right. So what is motivating them now to cut prices? Is it just because of changes in consumer behavior?
SELYUKH: Well, it’s – of course the most powerful marketers have, they vote with their wallets. And for years now, consumer products have been raising prices, citing their higher ingredient costs and wages. And it took a while for them to start noticing the people who were pushing back those prices in a reasonable way.
In fact, consumers this year actually bought more groceries than last year. For example, you still have Colgate-Palmolive saying, its advertising makes consumers reach for those kinds of things even though the prices are high. But some companies are seeing big cracks, with people buying fewer goods and switching to cheaper brands – such as Nestle, which also owns Nescafe and Gerber baby food, Kimberly-Clark sells paper of toilet and small tons, Pepsi sells chips and small soda. .
ELLIOTT: Let’s go to the big picture now. Does this buying behavior tell us anything about the wider economy?
SELYUKH: As always, it’s very complicated. There are many conflicting symptoms. It is clear that people are still coming out of the shops. Last week, federal data showed that consumer spending in the last quarter rose more than expected. And earlier this month, people spent big on Prime Day sales, an estimated $14 billion on gadgets, electronics, back-to-school items.
And of course, this all varies with money. It’s especially difficult for people with low and middle incomes, people who put things on credit cards with high interest rates. Here’s how Coca-Cola CEO James Quincey summed it up.
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JAMES QUINCEY: Sure, there’s a segment of low-income consumers who come from a little bit below or, when they go out, they’re looking for great value with a combo meal. Having said that, there are consumers who spend a lot of money like many premium categories or even more price tags.
SELYUKH: Many people go out to eat and drink a lot. Everyone is on the hunt for deals, but some people put their favorite dollars at the grocery store. And all that adds up to a sustainable economy, if you want to use that jargon.
ELLIOTT: So, Alina, what else are you after?
SELYUKH: So this week is a big one. We get more information about the American consumer from McDonald’s, Kraft Heinz, Procter & Gamble and Amazon. There is also a meeting of Federal Reserve officials, where they will again discuss lowering interest rates later this year.
And all of this is connected, of course, because few of us watch prices with as much interest as the Fed. Its aim is to reduce inflation by slowing the economy but not too much, which means that spending will also decrease. So far, inflation has been easing. The economy is shrinking. But how far will it go? That is not clear.
ELLIOTT: NPR business correspondent Alina Selyukh. Thank you very much.
SELYUKH: Thank you.
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