Consumer Pushback Signals Hope for Taming Inflation
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Consumers are increasingly pushing back against price hikes by companies, switching to cheaper store brands, shopping at discount retailers, and buying fewer discretionary items. This is forcing companies to moderate price increases.
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High inflation persisted longer in the 1970s/80s partly due to consumer psychology perpetuating it. Now consumers are responding differently by resisting high prices rather than accepting them as the new normal.
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Companies like Kraft Heinz, PepsiCo, and Unilever sharply raised prices in 2021/2022 to boost profits, exploiting pandemic savings and government aid. But sales volumes then dropped when consumers pulled back.
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Surveys show companies across industries expect to raise prices about 3% this year on average, down from 5-9% in 2022, suggesting slowing inflation even before Biden's attacks on price gouging.
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Economists say consumers resisting high prices will curb inflation back to the Fed's 2% target. Their "pushback" against companies' pricing power is a key inflation-fighting force.