The rich are so well insulated from the impact of the pandemic that they’ve managed not to see evidence of rising hunger in the US, like big lines at food kitchens. A new bit of evidence comes in the Wall Street Journal today, via a detailed account about how consumers are cutting back on grocery spending. With food such a core budget item, it seems likely that lower food spending translates into deeper cuts on other fronts.
The Journal attributes the falloff to the end of the $600 a week unemployment supplement in July. Grocers are sufficiently concerned that they are starting to offer more discounts.
The level of distress is almost certainly worse than the Journal reports, since the paper is relying on dollar spending. As most of you know, there’s been a lot of inflation in food prices even though the press has not taken much notice.
On top of that, I suspect, based on reader reports that some households are staring to up their stockpiles in anticipation of worsening levels of Covid in the winter, which could lead both to production problems and mini-buying panics. So if some are buying more to increase personal inventories, that means the adjusted average (in terms of purchases for current consumption) is even lower.
The Stop & Shop quote below is similar to other statements by industry players. Separately, I’m not sure how useful year to year comparisons are, since Americans have cut back on their restaurant eating and are consuming more at home, at least in part due to reduced restaurant and take out lunches for commuters. From the Journal:
Gordon Reid, president of Stop & Shop, a grocery chain owned by Koninklijke Ahold Delhaize NV, said he expects price to be a challenge for consumers in the last quarter of the year and into next year. While Mr. Reid hasn’t seen a direct connection to reduced unemployment checks, he said customers have become more price-conscious….
While sales of groceries, such as frozen dinners, cereal, soup and coffee, are still higher than they were a year ago, sales growth has slowed compared with July and prior months in the pandemic.
Sales growth of frozen dinners, for instance, averaged about 9% for the three weeks ended Aug. 16, compared with around 17% for the previous two weeks, according to the IRI CPG Demand Index. Cereal sales, meanwhile, averaged a 2% increase the three weeks ended Aug. 16, compared with about 6% average growth the prior two weeks, the IRI data show.
The data includes online and in-store sales at traditional grocers, dollar stores, mass retailers including Walmart and club stores. It doesn’t include convenience stores.
Grocery prices were broadly consistent with prior weeks, and restaurant dining held steady during that time, the IRI analysis showed, indicating that neither was a significant factor in the slowed grocery spending—further evidence that the halted unemployment stimulus was a driving factor. However, restaurant-data provider Black Box Intelligence said same-restaurant sales have declined less so far in August than in July, when including takeout, delivery and dine-in.
Some states with higher unemployment, such as Illinois, Nevada and New York, recorded a greater deceleration in grocery spending, according to IRI.
Fewer trips to grocery stores, along with smaller receipts per visit, are typical patterns during a recession….
The financial stress could lead to more people shopping at dollar stores, as middle-income consumers who wouldn’t normally shop there might start to, according to Morgan Stanley retail analyst Simeon Gutman….
Newly price-sensitive shoppers are buying more store-branded items, said Mike Duffy, chief executive of C&S Wholesale Grocers Inc., a distributor to grocery chains including Safeway and Southeastern Grocers. Private-label brand sales are outpacing national brand sales, he added.
The article also included anecdotes from shoppers at varying levels of distress, from one who has cut some grocery stores from her list and had become much more price-fixated in what she buys, to another who has lost her job:
Mary Proffitt, 63, who was laid off by her restaurant employer in Kentucky at the end of March, hasn’t received stimulus or unemployment checks since May because of a backlog in her state. She said she cut weekly spending on groceries by half to $100, and relies on canned and frozen vegetables. “I’ve never been this destitute before,” she said.
Krystal Ball also discussed how the divergence in conditions for the well off and everyone else is turning into a yawning chasm. She, like readers on the site, noted in particular the red-hot real estate market. That is not just in stark contrast with sharply rising mortgage delinquencies, already at 2012 levels, but as she points out, also with plunging consumer confidence and a high level of permanent job losses. And as Tom Ferguson pointed out in his TheAnalysis.news interview that we just posted, small businesses failures are set to continue, with an accompanying loss of jobs and owner wealth.
Krystal argues that the fundamentals are so poor that a 1929-level October crash is entirely possible, and that isn’t a hair-on-fire crazy idea, with so many non-permabear top experts warning that valuations are at nosebleed levels. But you don’t have to factor in a stock market crash to accept the proposition that the economy faces a world of hurt. A consumption-driven economy with a big drop in consumption is going to be a lot smaller.
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I was surprised to see Illinois among the states mentioned with grocery sales down. Gov. Pritzker, from the beginning, has made sure everyone on food stamps is receiving the maximum amount available, regardless of what you otherwise would be entitled to. It’s been a godsend with food prices being so much higher.
Could be it’s from people not qualifying for or applying for food stamps in Illinois cutting down(?)
Krystal Ball 2024!
My kids have gotten into the joys of gardening, and have picked up shovels and seeds to grow some food. They like the fresh produce, and their ancestors would be proud. What were Victory Gardens in a prior era need a new name. Any suggestions?
…*austerity gardens*…
Inflation Gardens
“Solvent & Green”
Get them to learn about seed saving, it’s a portal into the future that they can walk through now.
https://www.milkwood.net/2020/04/26/seed-saving-basics-how-to-start-your-own-seed-bank/
Nice downloadable chart:
https://www.seedsavers.org/seed-saving-chart
Maybe shorten that to . . . Solvent Green.
” Solvent Green is garden!”
What happens to the whales when all the krill are gone?
They stop being hunter gatherers and move on to being algae cultivators, of course!
They eat cake.
They go back to Titan.
” So Long, and thanks for all the krill!”
I confess to having budgeted about $250 to stock up with flour, oil, butter, canned tomatoes, plus many sorts of dried beans from my local Indian store before the end of Sept. It’s not just virus, it’s the election.
Meanwhile, so many people have stocked up with ammo that it is unobtanium.
don’t forget spices…with onions, carrots, peas, potatoes, and tomatoes (or sauce, I do canned tomatoes, I think they taste better than the hydroponic frankenfruits, unless I’ve got some home grown) one can make great indian food for cheap, and darn tasty as well…
Phyl being from New Orleans, ‘Beans and Rice’ is a soon to be our primary source of sustenance.
We have been doing dry goods ‘prepping’ on a small scale since this spring.
We old tyme semi-preppers already have sufficient ammo. On that front, seeing the havoc the teenager in Wisconsin has caused, the lesson is that the primary skill one needs to learn when dealing with firearms is when not to pull the trigger.
Funny that although they get eaten on occasion (gun deaths via suicide are the most common in these United States) why people would stockpile guns & ammo and not food, is a mystery.
What is particularly galling is I’m seeing significant price increases due to demand shifts but also the fact that we printed how many trillions of dollars to get stocks back up.
I’m super-glad the wealthy feel better now, but one of these days people are going to figure out that “working hard and saving” was just a con and the wealthy have been stealing deposit interest for decades.
And then?
I imagine it will already be too late.
The press never takes notice of price inflation; they pretend it doesn’t exist. Because of disruption in the food chain, I see empty spots on Walmart shelves. The price of meat is very high though chicken is still affordable.
It will only get worse. I watched a discussion about restaurant businesses and how their demise affected not only owners, workers, and landlords, but the entire supply chain from napkin vendors to factory farming. At this rate some 40% of restaurants will close for good. Both parties–and the Fed–have made sure the rich are still rich while the rest of us get poorer. If you think the protests over BLM are getting violent, wait until the evicted join the crowds.
Is it conceivable the stock market just isn’t ever allowed to correct much? We’re used to referencing stock market numbers as shorthand for economic activity/GDP, but what would happen if the Fed just kept juicing it? Could that not last a long time?
I think *some* of that is because people have stopped panic buying and are learning the limitations and refining their storage. We learned that five pounds of coffee lasts two weeks, so no need to have twenty pounds on hand as was the case in April.
There is only so much room in a refrigerator. Tree nuts should stored there. To buy them months in advance and not refrigerate them is begging for off flavor and rancid oils.
Remember the prepper’s motto: “Beat The Rush, Panic Now”
The “delayed” second stimulus begs the question whether there will be a second ‘stimulus’. [I remain confused by the idea of a stimulus when the economy has all but gone on vacation with our Congress. Stimulus? I think “keep alive” would be a more fitting epithet.] We are at a real life Wiley Coyote moment and our Congress has gone on vacation.
If Krystal Ball is correct about a long hard shrinkdown coming, I can understand why the Catfood Democrat Party would like to throw the Presidential Election. If they know what she knows, their thinking would be . . .
why inherit that moment? Let Trump win again and inherit that moment.
Of course, that presumes the R & D elites are acting on the “Fernando principle” that it is better to look good yourself than to help the non-elites feel good. (Unfortunately, that appears to be a pretty accurate presumption.)
What if we are beholding the sorry spectacle of each side trying to lose to the other side?
What if both parties are trying to throw the election like its a flaming bobcat on meth?
IMO there’s a real danger neither the dems or reps Want to spend more money on former workers. Pelosi pay go is likely bluffing with 2.5T, and the reps don’t look to budge anyway, both sides pointing fingers. If they’re not gonna spend before the election they’re not likely to spend after. Can kicking might be over.
How long can p/e’s continue to expend as most Corp earnings drop to zero? Granted a few net corps are doing very well, but not many others.
Plus I just noticed how much apples iPads are overpriced vs the oppo, people with reduced income are gonna notice.
I moved to Central México before the last election. Never have a been as happy with that decision as now. My little backyard garden goes year-round and there also are neighborhood mercados and little tiendas – carnicerías, fruterías, panaderías, etc. While wealthy expats go to the plasticized, over-priced big box stores, I get to know my neighbors better and support them as they support me. This is real community and, imo, real community is what will get a lot of us through these times.
But Yves, Trump didn’t stop the extra unemployment, the democrats did! Remember he passed executive orders reinstating $400 extra a week. It’s up to the states whether they issue the money. Oh, and its the states that have to pay for it. By taking it from their FEMA money. Luckily there aren’t any disasters anywhere (fires, hurricanes, floods, riots, etc) where states will need that money. And luckily none of the state budgets are suffering financially. Well, states that elect Republicans aren’t suffering. See Yves, greedy democrat states are just wasting all that extra FEMA money on stupid democrat policies.
Back to about gardening . . . and spending . . .
What if people expanded their view of gardening from merely being a way to “save” money into also being a better alternative way to buy food? Maybe even better food?
If you have a set budget to buy food with, and you KNOW how much money you are going to spend on food . . . . what if you spent some of that money on garden inputs which you then use to GROW the food which you don’t have to buy from the store any more? You have just “bought” food from your garden. But what about the work you had to do to grow the food from your garden? Well . . . . what about the work you have to do to actually “go shopping” for food?
Spending some of the “food money” on garden inputs will be good for the garden inputs business which will keep it alive into the future . . . . a future in which we would like to continue to have garden inputs to buy. And using the right garden inputs in the right way will allow us to have food as good as what we could have bought in the store itself. And as we get better at gardening and soil improving, we will grow food BETTER than what we could have bought in the store.
Lead the money around by the nose.