Inflation Has Altered Our Expectations of Prices
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What problem is introduced about shopping and price expectations?
Here's your Money Briefing for Thursday, March 14th. I'm J.R. Whelan for The Wall Street Journal. Have you tried shopping recently and coming away only spending what you thought you would? Good luck with that. Stubborn inflation is causing our expectations of what things should cost to be out of sync with reality.
When people think that deodorant should cost, say, $4 because they've been paying $4 for deodorant a decade, maybe longer, and then it actually costs $8, people are upset about more than just losing that $4. They feel like something is deeply structurally wrong.
We'll talk with our reporter Rachel Wolf about what some people are doing about it after the break.
Our expectations for how much things should cost isn't in line with reality. Wall Street Journal reporter Rachel Wolf joins me. Rachel, inflation ticked up to 3.2% last month, but it's still a lot lower than where it was a year ago. Isn't that good news?
In some ways, it's of course better, but it does mean that prices are still rising. They're just rising at a slower pace.
How is current inflation different from last year and why does it still matter?
Oh, so it's like a slow pain.
Exactly. Although people aren't necessarily feeling it slowly, they're feeling it whacked over their head every time they do something like go to the grocery store or buy a cup of coffee.
Over the past year or two, we saw food companies in their earnings reports say that consumers were willing to pay higher prices. What happened?
It's a little bit complicated. From our reporting, we found that people understood prices going up during the deep pandemic amid worker shortages, supply chain disruptions, runs on certain goods like toilet paper, of course. But as we get further and further away from the height of the pandemic, people are a little bit less tolerant. They don't understand why things are still so expensive. They expected it to be better by now.
How has this affected shoppers' ability to budget for a grocery store run?
Expecting to see one total at checkout then paying far more is contributing to a disconnect. Widespread malaise in an otherwise strong economy, economists and consumers themselves say. Basically, when people think that deodorant should cost, say, $4 because they've been paying $4 for deodorant,
Why are consumers frustrated when familiar items like deodorant double in price?
a decade, maybe longer, and then it actually costs $8, people are upset about more than just losing that $4. They feel like something is deeply structurally wrong.
That's almost double for the same deodorant. How do the people you spoke with say they're dealing with this?
One man I spoke to who always paid $4 for his Old Spice Stronger Swagger deodorant for, we're talking decades here, and then saw it priced at $8 at the pharmacy near his house. He works in the finance business. He can afford that $4 increase, he said himself. But he refuses to pay it. However, he still loves this deodorant. So what he's been doing is anytime he sees a discount store, he goes in looking for this particular type of deodorant. And he's only seen it a couple of times. But when he has, he's bought up every single stick they have in the store.
Huh. And what other situations did you hear about? And how are people handling them?
We heard about everything from the price for a Starbucks order or a salad bowl at Chipotle to basics like milk and dog food.
How are shoppers changing behavior to cope with higher grocery and treat costs?
Especially when it's a small treat. One woman told me that she bought Drake's Coffee Cakes, just one coffee cake, basically every time she went to the grocery store for her whole life. She's in her 60s. And she just refuses to pay the premium. Now, she has always paid about a dollar, seeing them creep up closer to two. It's not that she couldn't afford it exactly. It was more that she couldn't stomach it. But she feels they're lost acutely.
You know, it wasn't that long ago, I remember going to the grocery store to get milk and to get some things to make a salad for lunch. And if the price went over $10, I sort of, oh, are you kidding me with the $10? Nowadays, $10, I'd be having a parade in the streets.
Our benchmarks for how much a simple errand is going to cost us are totally out of whack.
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Chapters
6 chapters
1
What problem is introduced about shopping and price expectations?
0:02–1:25
2
How is current inflation different from last year and why does it still matter?
1:25–2:44
3
Why are consumers frustrated when familiar items like deodorant double in price?
2:44–4:02
4
How are shoppers changing behavior to cope with higher grocery and treat costs?
4:02–6:03
5
Which everyday purchases feel most painful and why do they stick with consumers?
6:03–7:35
6
How do 'reference prices' shape perceptions of value and the broader economy?
7:35–7:38
Speakers
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