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Economic Data versus Consumer Sentiment

Recent news reports have indicated that the United States economy is currently quite robust. Data points to a low unemployment rate, and an inflation rate that is slowly waning.

One economic indicator, consumer sentiment, measures the level of optimism that consumers have about their finances and the state of the economy. Although consumer sentiment has been improving slowly, most consumers remain worried about high prices at the grocery store and their long-term financial stability.

In casual conversations over the past several weeks, the discrepancy between improving economic data and lived financial experiences is felt most often when seeking to provide food for one’s family. Many friends complained about high prices, especially for eggs, milk, and bread - basic staples for most households. In fact, the price of eggs has risen 50% since the start of the global pandemic in March 2020. Shrinkflation is also on the minds of many. Shrinkflation, the reduction of a product’s size or volume per unit while keeping the same cost for consumers, is equivalent to more money out of the consumer's pocket when families require the same volume of food. Designed to help companies manage the rising costs of goods without immediately passing price increases on to consumers, shrinkflation is often incremental. More prone to notice a price increase rather than a size decrease, consumers recognize shrinkflation at varying levels. Over 60% of shoppers perceived the effects of shrinkflation on several products, while only 25% witnessed shrinkflation on a small number of products. Furthermore, once the new sizes are on the shelf, they typically do not go away.

Ongoing concerns about the economy have led consumers to be vigilant about their expenditures, opting to spend on services and experiences versus goods when possible. Results from ConsumerWise research indicated that more people anticipate splurging at a restaurant or bar than planned purchases related to personal care, beauty, jewelry, or apparel.

Successfully navigating through challenging economic times requires planning and flexibility. I encourage everyone to make a budget and do your best to stick to it. Remember, the path to financial freedom is often long and full of hills, bumps, and curves,

Economy, Shrinkflation, ConsumerWise.


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