Shoppers are buying less where prices are rising fastest, showing that inflation isn’t being driven by demand but by companies passing on costs
I have done several posts on how people have been dealing with the inflation of the last few years as well as how they have been affected. Links to those posts are listed after some excerpts from the article. Many of the things consumers are doing involve more time and effort doing things they would not normally do. This is one of the costs of inflation, what we have to do to avoid it or mitigate it.
This article suggests that supply is shifting to the left when it mentions companies passing on costs. So if we have a decrease in supply, price will go up and quantity will go down (the article says consumers are buying less where prices are rising fastest, which is not a surprise). If both price and quantity were rising, then it would mean that demand was increasing (or at least increasing more than supply is decreasing).
Excerpts from the article:
"Shoppers are spending less on goods like clothing, furniture and sports equipment, which have risen in price over the past year. At the same time, they are spending more on some services and experiences, like travel and healthcare."
"many of the goods for which prices have risen fastest are the same ones for which spending, adjusted for inflation, is falling most."
"Spending on clothing fell about 7% between December and the end of February, after adjusting for seasonal variations"
"Clothing prices were up 9% over the period."
"furniture buying was down 5% as prices were up 7%. And sporting-equipment purchases were down 6%, with prices up 16%."
"Consumers are pulling back where price increases on goods are most dramatic. Consumer spending in aggregate appears to be holding up, a sign that some say shows inflation isn’t having that much effect despite widespread complaining. Under the surface, inflation’s impact is clear."
"it isn’t strong demand pulling prices up but other factors largely around tariffs and supply-chain pressures. Companies . . . are seeing more resistance to price increases." [tariffs are like excise taxes that cause supply lines to shift upwards by the amount of the tax and this has the same effect as a leftward shift in supply-see my post Americans Are the Ones Paying for Tariffs, Study Finds that illustrates this with a graph]
"Consumers aren’t cutting back everywhere that prices are rising. They are still spending on travel, financial services and healthcare services, for example, even though prices are up."
"families with some level of disposable income are making constant trade-offs and negotiations about where and how to spend."
"Chicago financial adviser Michael Biggus said many of his clients are cutting back on discretionary purchases, even those with healthy savings and incomes."
Related posts:
Are you hurting the economy if you bring your lunch to work? (2025)
More people are bringing their lunch to work because restaurant meals have been going up in price. Again, more tasks that people are performing to avoid inflation
Child Care, Rent, Insurance: Where Inflation Hits Hardest Now (2024)
Why do workers dislike inflation? (2024)
"workers must take costly actions (“conflict”) to have nominal wages catch up with inflation" They have to bargain with or fight their employers to get a wage increase to match inflation.
An Increase in Uninsured Drivers Is Pushing Up Costs for Everyone Else (2024)
Inflation has caused consumers to choose what they need to cut back on (insurance)
Costco and Sam’s Club Aisles Are Full of Gen Z Shoppers (2024)
Consumers are buying in bulk to save money by getting a lower per unit price
Inflation is mentally taxing (2024)
Inflation is mentally taxing. Dealing with a straitened budget exacts a psychological toll as well as a financial one
Store Brands Are Filling Up More of Your Shopping Cart (2024)
People are on the look out for cheaper alternatives due to inflation
Consumers Fed Up With Food Costs Are Ditching Big Brands (2024)
After
years of price increases, food companies say more consumers pull back;
fast-food chains and snack makers plan new deals and flavors
Are Americans Worrying Too Much About Inflation? Two opposing views (2024)
The Era of One-Stop Grocery Shopping Is Over (2024)
One
thing that I always talked about with inflation was that one of its
costs was all the things we had to do to avoid it. Consumers are making
8% more trips to different retailers as inflation continues to upend
household budgets. They are going to more stores to find lower prices.
But it costs time to do that and probably more money on gas.
When workers were paid twice a day and given half-hour shopping breaks (Germany, 1923)
By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. The requirements to calculate and recalculate commercial transactions in the billions and trillions made it practically impossible to do business in paper Marks.
