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Key Takeaways
- Although high inflation has made it more difficult to keep up with the cost of living, consumers continue to spend.
- Companies are feeling pressure to discount their products as customers shop around for better deals.
- This has caused makers of consumer staples and retailers to struggle to retain customers.
Inflation hasn’t stopped people from shopping, but it has changed the way people buy.
The Federal Reserve’s Beige Book this week showed anecdotal evidence from around the country that detailed how consumers are turning away from full-price products.
Many households have struggled to keep up with record-high inflation and interest rates. However, consumer spending is still strong as shoppers look more diligently for discounts instead of cutting back on spending, the book found.
This has created an issue for retailers and makers of household staples. The report states companies are starting to notice that people are working to dodge higher prices by seeking out discounted products.
“Multiple retailers noted that passing along cost increases had become more difficult as customers ‘shop[ped] around’ more for lower prices,” Cleveland Fed officials said.
Consumer staples companies have struggled in recent quarters as food makers like PepsiCo (PEP) and Pringles maker Kellanova (K) are contending with “challenging” economic environments. Retailers like Walmart (WMT), Amazon (AMZN) and Target (TGT) have begun to roll out discounts on thousands of items to accommodate customers.