here to discuss is Mark Matthews VP of Research Development
and industry analysis at the National Retail Federation, thank
you so much for joining us. You know,
we gotta jump right in and talk about how people
are feeling about the rise and inflation. I know
it hurts me and it hurts you. So what
does the american people say? Yeah, absolutely.
It's a major concern. As you said, it's
now the number one concern of consumers. Because,
you know, when we're out there shopping in the
grocery stores, when we're buying gas, you know
, we can see the prices going up. And
it's a particularly issue, because you know, our
research shows that 58% of Americans are either dipping into
savings or going into debt to pay for higher prices
. And it's actually much worse for lower income hassles
, 71% of lower income hassles are using savings or
debt to finance higher prices. And you know,
when the Fed starts raising rates, you know,
that cost of the debt is going to get much
, much higher. So it's a real problem that
that our government needs to address. Well, you
know, hopefully they'll address it soon. But in
the meantime, are you seeing consumer behavior changes as
a result of the higher prices? The cost of
living. Absolutely. You know, we were out
there doing polls all the time asking consumers what they're
doing. And you know, we we we see
that they're switching to cheaper alternatives where, you know
, they're uh switching to to store brands. You
know, they're looking for coupons or sales more uh
there, you know shopping at discount stores and in
some cases they're cutting back on behavior, cutting back
on purchasing in some areas so that they can spend
on necessities. Well, what can the White house
due to sort of ease this, you know,
inflation that we're seeing in the hurt people are feeling
right now? Yeah, so we just saw Congress
passed the ocean Shipping Reform Act last night and that's
on President biden, President biden's desk and hopefully that
will get signed and that's an important step forward because
, you know, shipping rates have been rising dramatically
and that's adding to the cost for everybody. But
what we'd really love to see happen next is is
for government to reduce, Reduced the tariff tax.
The fact of the matter is that, you know
, many studies show that that is costing households as
much as$1,200 a year. So by by removing
those tariffs, the government could, you know,
put some money in the pockets of the consumers who
needed the most in these high inflation times. Yeah
, but what's the likelihood of the US lifting those
tariffs on china? Well, you know, I
can't speak for the government in the cells, but
it's an easy fix. Uh and it's really something
that ought to be done because frankly, you know
, tariffs tend not to work as policy, they
never achieve what they're trying to achieve and what they
end up doing is they end up hurting us,
they end up hurting the consumer because we're the ones
who end up paying those higher prices? So,
you know, we would we would look for the
government to uh to address some of the trade imbalances
in other ways and remove those tariffs. So,
you know, we can have a little bit of
extra money in our pockets to to fund these higher
prices that we're seeing. Yeah, well, you
know, companies are definitely proving to have strong balance
sheets and pricing power. What can companies do to
offset the inflation that we're seeing? You know what
we're actually seeing, you know retailers having to to
eat some of those costs. Because when you think
about it, you know, uh prices are rising
across the full spectrum. So uh you think about
raw material prices, they've been rising, you know
, manufacturing prices, the P P. I.
Number came out today, the producer price index,
which measures wholesale prices, that was up 10.8%.
So near record levels. You think about the wage
increases and then you think about the shipping increases,
which in some cases have increased 1000% during the pandemic
. Uh And that's just to get get it to
our shore's, then you have, you know,
warehouse prices, increasing rent prices, increasing. Uh
So, you know, across, you know,
the full spectrum of getting the product made to getting
it to our shelves, we see prices rising.
So anything the government can do to target specific areas
to to reduce those those impacts is gonna help help
bring those prices down. Well, do you have
any suggestions for the regular consumer also? I mean
, everyone's trying to save and survive right about now
. Yeah, absolutely. And you know, you
you you have to get out there and and be
looking for bargains. You know, we we've certainly
seen some companies announced that there may be slightly overstocked
in some areas. You know, the challenge for
retailers. This is really, really hard to predict
, predict six or nine months ahead when you're actually
ordering the products. So in some cases we have
a little bit of inventory mismatch, we have too
much of some products and those will be discounted.
So there will be some some savings for consumers out
there that that they can make, You know,
the Fed is expected to meet tomorrow and it's expected
that it could raise the interest rate by.75 again
. So how do you think this will impact the
markets? And do you think that will help or
hurt inflation? Well, you know, the expectation
, uh, you know, economic theory says that
as you raise rates you put pressure on, on
the economy, You make money less freely available,
You make the cost of debt more expensive. So
, you know, we we call that demand destruction
. Uh and that's what the Fed is going to
be out there. Doing the problem though, is
that there is a lot of money sitting on the
sidelines right. Uh You know, we saved a
lot of money during the pandemic. So we still
have the ability as the consumer to, you know
, especially in the higher income ranges to continue to
spend through inflation. So it's gonna take a while
for those Fed actions to take effect. And therefore
it's even more important for you know, government and
Congress to to act and do the things that they
can in the short term to help households, you
know, until the Fed actions may, you know
, eventually bring down, bring down inflation. That
will take a while. You said it's gonna take
a while, you know, we've heard estimates that
it could go up several times the interest rate until
the end of the year, up an additional 3.25
or 3.5% more onto what it already is. So
do you think that will solve the problem after it's
gone up that much so much dramatically that it could
be 8% interest rates out there for people? Yeah
. Uh It's eventually going to have an effect.
Uh You know, it will it will slow down
uh the the ability of, you know, companies
and consumers to spend. Uh and we tend to
see unemployment and uh and interest rates, our inflation
moving in different directions. So you know, you
can expect to see maybe companies started start to,
you know stop investing in uh in uh, you
know, building new plants and and hiring people,
but, you know, like I said, that
will take a while. But yes, if you
get into, if you get into that range where
, you know, we are in in, you
know, positive real rates, uh, that is
going to have an impact on the economy, but
it's gonna have an inordinate impact on the lowest earning
households. Uh And those are the people that we're
worried about, and those are the people that were
looking to to the government to take action and actually
do things that they can help them. So,
in your expertise, is there a timeline associated with
these inflation rates? Because they rose them in May
? They're planning on raising them again in june.
And there's speculation, they could raise them again in
july like where is the discrepancy, I guess if
you will sometimes, and how long they wait,
because it's almost in some people's perspective, they could
wait a little longer before they raise it again.
Why? So soon, back to back to back
. Right? So, you know, they meet
eight times a year, uh and you know,
what they're doing is they are watching out for what's
happening in the economy. And I think a lot
of people were hoping that this most recent set of
inflation numbers, we're going to soften. You know
, there's something called base effects where, you know
, every every month we're complaint comparing against the higher
prices, You know, as inflation rises. So
you should naturally see some easing of of inflation that's
not happening. Uh you know, it actually got
worse. Uh So that's going to force the Feds
hands and they are going to have to raise rates
this time, but they're going to continue to take
a wait and see approach because their hope is that
inflation starts to resolve itself. Uh And that they
won't have to go so heavily into uh the uh
the the interest rate rises because frankly, uh the
real risk here is that We pushed the economy into
a recession, you know, more and more economists
are looking towards a potential recession, you know,
over the next 18 months And the next 18 months
. That's soon, wow, okay, so what
are the signs or signals that we as consumers can
be on the lookout for that? The inflation is
stabilizing, that is not continuing to rise. You
know, we we need to keep watching the numbers
as they come out from the Bureau of Labor Statistics
and and the Fed. Uh and you know,
hopefully, you know, we get some, you
know, degree of resolution in in terms of what's
happening and uh in Ukraine that is definitely creating issues
for inflation issues for for gas prices and commodity prices
. Uh So, you know, hopefully uh you
know, there there are some external external factors that
will come into play and and help ease some of
the situations that we're seeing. You know, we
we also hope that, you know, maybe the
supply chain issues start to ease up a little bit
, uh, you know, we we get,
you know, less less onerous prices being charged by
shipping companies. Uh, and, you know,
we we start to see some some reduction in the
cost of getting goods from, you know, the
manufacturers over to the retailers. All right, all
great insight. Hopefully we can avoid that recession,
but we'll keep an eye on it. Yeah.
Alright, Thank you so much, Mark Matthews,
National Retail Federation, VP of Research Development and Industry 00:10:31.509 --> Analysis.