Clay Watkins is a huge fan of LaCroix sparkling water, especially the watermelon flavor.
The suburban Chicago teacher of education was thrilled to see it for $8 at his local grocery store.
Watkins recalls, “I went to grab it and I was like, ‘Wait a minute,’”
Surprised to discover that a 12-can package of sparkling water was now only 8 aEUR with no price change aEUR,” a practice commonly known as “shrinkflation.”
He says, “I’m no mathematician.” “I teach science. However, I believe that it’s a 33% increase in price.
It’s actually worse. The package is 33% smaller but the cans remaining are 50% more costly.
Frustrated, Watkins returned the LaCroix water and sent a tweet. He later bought sparkling water from Trader Joe’s at a cost of 79 cents per liter.
@lacroixwater, what’s the deal? Three weeks ago a 12 pack went for $4.99aEUR #repackage #groceryprices pic.twitter.com/Y2N2Lnxd46
As inflation rises to a four-decade high, many people face more difficult decisions.
Friday’s Labor Department report showed that consumer prices were 8.6% higher in May than they were a year ago. This is the highest increase since December 1981. The price of gasoline, groceries, and rent all contributed to an increase in prices by 1% between April-May.
The price hikes for most of the pandemic are being noticed by shoppers who have swallowed them blindly. In some areas, gasoline prices have reached $5 per gallon. Groceries prices are continuing to rise at an alarming rate.
“The Ukraine war aEUR’ February, March aEUR’ was the turning point,” says KK Davey who monitors shoppers’ behavior at market research firm IRI.
Davey states that since Russia’s invasion in Ukraine drove gasoline prices skyrocketing, middle-income customers have been resisting price increases. They are increasingly turning to discount shops and choosing generic products that are cheaper.
Joanne Lee now buys regular eggs, and not the more expensive, free-range variety she likes. She has also reduced the amount of salad toppings she uses.
“There is a crouton I like. Lee says that the price is $1.50 higher than the generic Kroger brand so she switched. They’re not terrible. They’re not my favorite quality.
Lee, who lives in West Lafayette Ind., is not a cheap pet owner. The name-brand pet food is still available for the golden doodle.
Lee laughs and says, “She’d still spoilt.” “She eats the most expensive food of all.”
Davey said that it is not uncommon for shoppers to cut corners on certain items and spend more on others. Although they might be tempted to extend a tube or bottle of toothpaste, it is not uncommon for shoppers to spend more on other products. However, when baby formula or toilet paper are in short supply, the price is irrelevant.
Davey states, “If you have to have it you have to have it.”
Consumers may be careful about how much they spend at the grocery store and gas station, but they still open their wallets to pay for expensive restaurant meals, tickets on flights, and rooms in hotels. Inflation has been outpacing consumer spending every month since January.
Many people are trying to make up lost time when it comes travel and entertainment.
“This summer, there’s a mindset that says, ‘We’re going to vacation and we’re certainly not putting it off.'” Wells Fargo economist Tim Quinlan said. “Consumers are not happy with the prices but they’re willing to pay it for those experiences for a while, even though they don’t like them.”
Many people have to draw down their savings or use their credit cards to pay for inflation. In April, the personal savings rate fell to a 14 year low while revolving credits grew at an average rate of almost 20%.
Quinlan states that you can keep your spending in check for a few months but not forever.
Everyone will be back to budgeting again after Labor Day when all the credit card bills are due. We expect that growth will slow as we approach the end of the year.
Quinlan believes that prices will eventually rise if there is a slowdown of consumer spending.
The Federal Reserve is working hard to speed up that process by increasing interest rates and making borrowing money more expensive.
While the Fed’s actions might help to lower inflation, some are concerned that they could lead to a recession.
Watkins, the teacher who switched from LaCroix to cheaper sparkling water after it became too costly, understands that not everyone can make such adjustments.
Watkins volunteers at Chicago’s food pantry, where he has seen an enormous spike in traffic the past six months.
He says, “The people most affected by food and gas prices are those who don’t have much margin.” They don’t know how to cut.
As long as the prices continue to rise, people will have to make tough choices about what they can afford.
