Top executives at Walmart highlighted the issue of elevated food inflation during a recent conference call while also pointing out that inflation in dry groceries is a much more significant problem compared to fresh groceries.
“Generally speaking, food inflation has been the most stubborn of all the categories. So, we were in mid-double digits in the third quarter, and the fourth quarter hasn’t come down all that much. A little bit, I guess we could say, has come down the last couple of months. But it still would be a high level of disinflation at this point. So, it just looks to me as a little bit higher than what we were expecting going into the year,” John Furner, president and CEO of Walmart U.S., said during the earnings call on Feb. 21.
Doug McMillon, CEO of Walmart Inc., pointed out that there is a difference in inflation between dry groceries and fresh groceries. McMillon called the inflation in dry grocery and consumables as “stubborn, mid-double digit” and that “those are going to just be with us for a while.”
Regarding fresh groceries, eggs that were registering a 200 percent inflation in January are now seeing an inflation of 50 percent, milk costs less than a year ago. and beef is lower in terms of pricing, he pointed out.
“Think of the fresh categories as kind of bouncing around, going up and down, and being more volatile. It’s dry grocery and consumables that we think are going to create the pressure that customers are going to feel and have the impact as it relates to us on mix over the course of the year,” McMillon said.
High Food Inflation
According to data from the U.S. Bureau of Labor Statistics, annual inflation in January 2023 came in at decades-high 6.4 percent. Annual inflation has remained above 6 percent for every single month since January 2022, far away from the Federal Reserve’s target rate of 2 percent inflation.
However, the 6.4 percent January 2023 inflation rate does not fully capture the massive inflation among some food items.
For instance, fresh whole chicken was up by 13.8 percent, flour and prepared flour mixes by 20.4 percent, breakfast cereal by 15 percent, white bread by 16.3 percent, and cookies by 17.7 percent.
Breakfast sausage and related products rose by 10.1 percent, potatoes by 12.4 percent, frozen vegetables by 18.6 percent, and coffee by 12.8 percent.
The biggest price increases were registered by eggs, which rose by 70.1 percent, butter by 26.3 percent, and margarine by 44.7 percent.
Affecting Quality of Life
Elevated inflation rates have heavily affected the quality of life for Americans. According to a survey conducted by Pymnts and LendingClub that was published on Jan. 30, around 64 percent of respondents admitted to living paycheck to paycheck by the end of last year. This includes people who were making more than $100,000 annually.
If prices continue rising, 27 percent of respondents feel their personal finances will get worse this year. While 72 percent cited inflation as a reason for their pessimistic outlook, 66 percent put the blame on economic uncertainty.
Data from the Country Financial Security Index showed that 27 percent of American households had withdrawn money from their savings in the past year due to their difficult financial situations.
Among those who withdrew money, 54 percent used the funds to pay for everyday expenses like food, rent, and utilities, while 35 percent used it to meet an “unexpected expense.”
A recent poll by Rasmussen Reports found that 57 percent of respondents believe that the price of groceries will be higher a year from now. In addition, 57 percent also said that surging food prices had forced them to change their eating habits.