Advertisement
This is member-exclusive content
icon/ui/info filled

businessRetail

Will inflation ease its painful grip on consumer prices in 2023?

Two CEOs who position their Walmart and Costco stores as low-cost retailers say some prices are heading down.

Update:
This is one in a series of stories looking ahead to business challenges and trends for 2023.

Since the 1970s, Americans have come to understand that global shocks such as Russia’s invasion of Ukraine can send gasoline prices spiking for a time, but a dozen eggs aren’t supposed to be so expensive.

Eggs were one of the biggest price gainers in the grocery shopping cart in 2022, but the kitchen staple has its own reason: Outbreaks of avian flu are taking out laying hens, more than 40 million of them.

A dozen eggs cost an average of $3.59 in November, as measured by the Labor Department’s Consumer Price Index. That’s twice the average price of $1.80 a year ago. Some egg prices are over $5 a dozen.

Advertisement

Inflation in Dallas-Fort Worth has been rising faster than the U.S. average all year, and it, too, has a special phenomenon driving it.

D-FW Retail News

The latest on retail openings, closings and trends in D-FW.

Or with:

Weighted in household budgets much higher than eggs is the big jump in rents and costs of owning a home.

Advertisement

D-FW housing costs — including electricity — are 10.2% above a year ago, the highest annual increase since October 1981. Included is an 11.8% year-over-year increase in rent, the highest since April 1983, according to the Bureau of Labor Statistics’ most recent inflation breakdown for the Dallas area.

A big break came at the pump. Dallas-area gasoline prices for the first time in two years are now lower than a year ago.

That’s just three things we spend money on, and each had little to do with the other. Overall, consumer prices closed out the year 8.4% higher in D-FW than they were a year ago, ranking among the steepest increases seen in major U.S. metros.

Advertisement

So what’s the outlook for inflation in 2023?

The money is on inflation coming down but slowly. The Commerce Department said prices rose 5.5% in November from a year earlier, down from a revised 6.1% increase in October. Excluding volatile food and energy prices, so-called core inflation was up 4.7% over the previous year.

The Federal Reserve’s target is 2%.

Here’s how the CEOs of major U.S. retailers who pitch their brands on lower prices see it:

Costco CEO Craig Jelinek, who describes his wholesale club chain as “the price police,” said he believes inflation is moving in the right direction — down.

Lower shipping costs for furniture, which mostly comes from Vietnam, is driving down furniture prices, Jelinek said in an interview with CNBC.

Input prices for lumber and even meat are dropping, but not eggs, he said. The price for the breakfast staple’s companion, bacon, is coming down, too.

Advertisement

But chemicals that go into detergents and paper products are going up. The other big issue is rising labor costs, Jelinek said.

Walmart CEO Doug McMillon is focused on everyday items. Beef prices are coming down, but chicken is more expensive. Fruits and vegetables are in better shape. (A new welcomed common site is the 58-cent avocado.)

“We’re seeing the most stubborn and persistent inflation — mid-double-digit percent increases” in dry groceries and consumables, he said.

Advertisement

Both CEOs are pushing suppliers to lower prices. Costco has the leverage of being a limited product retailer, meaning it can opt not to carry brands that won’t agree to its wholesale price. Walmart has the volume advantage. Few can sell more of one thing than Walmart.

After a year of inflation and higher interest rates, the prospect of a repeat in 2023 is making people think differently about spending, even though inflation eased some in October and November.

People have some control over their spending in inflationary environments and are making shifts and substitutions. That will eventually have an impact on prices.

Advertisement

Twitter: @MariaHalkias

Looking for more retail coverage? Click here to read all retail news and updates. Click here to subscribe to D-FW Retail and more newsletters from The Dallas Morning News.

Read more stories about retailers and consumer spending
View More