The headlines say price inflation is tame, but how are prices really affecting you? Differences by category—think health care, rent, clothing, and eggs—are contributing to workplace winners and losers and creating opportunities and threats to household spending.
That’s the big-picture takeaway from the latest data through September 2015 on U.S. consumer prices (i.e., CPI). Below is what these trends mean in terms of their impact @work and @home:
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Impact @Work: Workplace “winners” include healthcare, housing, home-related goods, autos and restaurants where households are spending more to reflect their “needs” and “wants.”
Household “needs” are evident in places where price pressures are rising. In categories such as healthcare and rents, households have no choice but to spend more as prices rise. They “need” to spend more in those places. In other categories such as autos and eating out, households simply “want” to spend more.
- To sustain success, the workplaces that are able to raise prices should not overplay their hand—especially as price inflation returns in other categories in the longer term and puts greater pressure on household spending;
The workplace “losers” are mostly in retail categories—especially at food and big-box stores. That’s where households are economizing as price pressures subside there. The “savings” in these retail categories help households—especially lower-income households—pay for “needs and wants” in non-retail categories.
- To improve performance, the lagging workplaces should use price cutting more judiciously in recognition that lower prices do not boost unit demand as they did in the past. And, it will help to become more like the “needs” and “wants,” where it is easier to raise prices and attract demand.
For more on how these price trends affect the outlook for the retail holiday, see the post at this link.
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Impact @Home: Although overall price pressures are muted, households should recognize the significant risks they face from rising prices in certain categories—as well as opportunities to save money where prices are falling (see graphic below):
- Cut back on buying eggs as prices soar and be mindful of the price pressures in some school-related categories—as well as in prescription drugs.
- Egg prices (up 36% from a year ago) are likely to stay high for a while as avian flu reduces supplies.
- Child care and pre-school, school books, and infants’/young children’s apparel are the school-related categories that merit a close watch on expenses.
- In the case of prescription drugs, look for generic versions that should start to come into the market this year for some prescription drugs (e.g., Lantus, Abilify, Copaxone).
- Take advantage of lower prices in categories such as appliances, girls’ apparel, apples and toys—not to mention the opportunity to travel by car, given lower fuel prices.
- Apparel except for infants/children’s apparel generally represent good buying opportunities as prices fall—but the falling price pressure is greatest in girls’ or teens’ apparel.
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