Companies and consumers in 'pull and tug' over prices

Some companies are starting to lean into price reductions while restaurants offer more value meals on their menus. As consumers have become more discerning and attempt to cut costs during prevalent inflation, the Conference Board chief economist Dana Peterson states consumer "loyalty is key" as she outlines how corporations have to catch up with consumer demands.

"We are seeing lower prices for some types of goods, especially things like cars and RVs, those types of things. But consumers are also looking for breaks on food and gasoline. So we haven't really heard that much from those types of companies saying they're going to lower prices. Again, because they are facing pretty severe labor shortage challenges that are causing labor costs to rise," says Peterson.

She affirms this is a "pull and tug" scenario, believing consumers will continue to remain loyal to companies and brands who are taking note and lowering their prices.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Nicholas Jacobino

Video Transcript

When we're getting the read throughs from earnings and and, you know, as we're continuing to really hear from companies, companies like Kraft Heinz this morning that are giving us their read through on the consumer and saying, Hey, yeah, this is a consumer that is looking for value and we might have to put more promotions, more discounts, even into the mix.

Where possible should consumers be preparing for some of those promotions to really, really come in droves?

As large corporate, uh, corporate entities are trying to figure out how to best continue to have that relationship with the consumer, despite knowing that this might impact their margins in the near term?

Sure, loyalty is is key, and consumers are loyal to those companies that listen to them, and consumers are calling for price reductions.

And indeed, we are seeing lower prices for some types of goods, especially things like cars and and RVS those types of things.

But consumers are also looking for breaks on food and gasoline.

So we haven't really heard that much from those types of companies, saying they're gonna lower prices again because they are facing pretty severe labour shortage challenges that are causing, uh, labour costs to rise.

So there's this pull and tug.

But certainly I think consumers will remain loyal to those companies who start lowering prices.

And certainly that's going to be constructive towards the Fed, feeling comfortable about cut interest rates.

And just lastly, while we have you here, I mean, we've been evaluating a few more earnings reports Starbucks saying that people are pulling back on discretionary spending.

So that little luxury of coffee getting a little bit more of a thought process even as you're standing in line, I might say only, you know, two pumps instead of the three pumps of whatever flavour that people are asking for.

All those things considered our little luxury is gonna be under pressure as consumers really try to figure out where they need to pinch pennies.

We're already definitely seeing that in services where we asked the big question, our kind of biannual question about where consumers are planning to spend more or less on services.

And they are saying we're gonna spend more on services.

We need things like health care and car insurance and even for daycare for our kids.

But we're gonna spend less on things like going to the movies or going to an amusement park.

The interesting thing is, they still want to go on vacation.

But even those vacations are being downsized a little bit where they're like, Yes, we wanna go on destination.

But we're gonna spend less on all the goodies that go along with going on that trip.

Yes, certainly.

Uh, some of those decisions needing to be made, uh, within, uh, my own vacation trip recently.

Dana Peterson, chief economist at the conference board.

Dana, great to see you.

Thanks so much.

Thank you.