PYMNTS MonitorEdge May 2024

Will April’s Dip in Food Prices Give Paycheck-to-Paycheck Consumers a Break?

Will April’s Dip in Food Prices Give Struggling Consumers a Break?

Inflation’s heady pace may have slowed a bit, but one wonders if a slight decline in food prices will be enough to make the paycheck-to-paycheck consumer feel more financially comfortable.

As reported by the Bureau of Economic Analysis, the Personal Consumption Expenditures Index (PCE) was up 0.3% in April, measured month over month, including all categories — and including essentials such as food. That’s a slowing pace from the 0.5% month-over-month rate seen as recently as March.

Drill down a bit and the prices paid for goods, overall, were up 0.2%, as the prices paid for services gained 0.3%.

Groceries in Focus

Food prices were down 0.2% after a flat reading in March and roughly 0.5% gains in preceding months.

The data showed that with at least some moderating inflation, disposable personal income ticked up just a bit, to $20.85 billion, where that number had been about $20.81 billion in March. But at the same time, personal savings dipped a bit from March to April, from $747.1 billion to $744.5 billion. The personal saving rate was 3.6%, down from a recent high of 4.1%.

PYMNTS Intelligence data found headed into the first few months of 2024 that 58% of consumers said they were cutting back on nonessential spending because of rising grocery costs. Since most consumers live paycheck to paycheck, at about 60%, the read-across is that many households have been tempering their spending due to the cost of keeping the fridge stocked.

It’s too early to tell if the April data will be the start of some larger trend where inflationary headwinds abate enough so that consumers get renewed vigor. But as has been seen with separate PYMNTS Intelligence data, the basics of life — food, clothing and shelter — account for roughly a quarter of expenditures. So, a rollback in the aisles, especially at the grocery store, would help. Walmart, Amazon and others are making widespread cuts to food prices.

The pressures are evident, according to April’s retail sales data, which was released earlier in the month.

The U.S. Department of Commerce detailed that retail sales were unchanged in March, which in turn was revised downward from 0.7% in the previous reading to 0.6% over February’s levels.

Some Discretionary Spending Pressures

It was the discretionary categories that saw the most pronounced pullbacks, even if the overall, headline number was flat.

Non-store retailers, widely used as a proxy for online sales, were down 1.2% in the month. General merchandise stores saw a 0.3% drop, sales at sporting goods and hobby stores slipped 0.9%, and retail sales were 0.6% lower at health and beauty establishments.

Grocery sales were 0.8% higher in the month. When compared with Friday’s BEA data on price declines, that figure indicates consumers were filling their baskets.

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