Target CEO Brian Cornell says shoppers are pulling back, even on groceries, as they feel stressed about their budgets.
In an interview with CNBC’s Becky Quick that aired Thursday morning, he emphasized that the retailer has posted seven consecutive quarters of declining sales of discretionary items, such as apparel and toys, in terms of both dollars and units.
“But even in food and beverage categories, over the last few quarters, the units, the number of items they’re buying, has been declining,” he said in the interview.
Except wage growth is now out pacing inflation, so it’s a bit more complicated than that
For people in the lower income bands that buy at Target it’s Food inflation that counts, not the general inflation figure that’s calculated using a basket of goods and services with many things which are beyond the purchasing power of such people.
The personal inflation for such people is almost certainly higher than their wage growth.
But food inflation is at around the same level as overall inflation, so I imagine it’s close if not the same. Do you have the numbers to back this claim up or is it just gut?
You are correct that Food Inflation is at the same level as the broad Inflation right now.
However last year when inflation peaked, Food inflation was 10.4% Y-on-Y (source, see 3rd chart) whilst broad inflation was 6.5% (source).
Meanwhile wage growth was at around the 6% mark (source) so below even broad inflation.
Looking at the graphs in all 3 sources, the higher than inflation average wage increase at the moment (even if it was evenly distributed across all income ranges, which in the present day US it is almost never the case) isn’t enough to compensate the already baked-in higher food prices due to the food inflation last year and the first quartile of this year.
Given that when people get overextended they will first draw down on any savings they have and cut down on non-essentials, and the problems that Target now pointed out didn’t just start today, it makes some sense that what they’re seeing is the reflection of an accumulation the effects from above wage growth inflation from April 2021 to early this year which was worse for Food during most of that period, significantly so at its peak.
Yes but we are just seeing people cut back now, when wage growth is now outpacing inflation. The top level comment made the claim that wages are stagnant. I corrected that by pointing out the facts and that it’s more complicated…and then you went on yo explain how it’s significantly more complicated.
And why put in all of this effort to cite your other sources, and then just claim that the poor are being screwed by wage growth, when low wage workers saw the largest wage increases coming out the pandemic? I can’t find the stats for right now which groups are seeing most robust growth.
On average, and that isn’t true for everybody everywhere (even within the US)
And the price of some food items have fallen over the past year. What’s your point?
My point being those who haven’t seen an inflation matching salary increases, which applies to a lot of people, are going to be hit hard by the large average increases in grocery prices regardless of if some happen to go down.
Sure, but this is always true.
And that invalidates my argument how exactly?
We’re talking about what is happening now. Pointing out something that always happens in an argument thats trying to explain current issues doesn’t make much sense.
And I’m arguing this is what’s happening right now, even if it’s been happening before.
Wages have risen, but that’s not even close to being for everyone, whereas almost everyone has felt the increase in grocery costs (even if some stuff fell this year)
There’s a reason food bank use is still continuing to increase, because more and more people are struggling to even afford groceries.
True, there is a reason for this. But that doesn’t mean anything that can explain it is the truth.
And the claim that it is because wages are stagnant and prices are rising is not the explanation, because wages are now out pacing inflation, and it’s just starting to ramp up now, so it’s more complicated.