Walmart and Target are lowering prices. How might this impact inflation?
Walmart experienced an increase in sales for items in their stores which have been open for a year or more, reaching 3.8% compared to the previous year. This achievement can be attributed to the company's success in maintaining low prices while inflation remains sticky. Walmart has been a popular choice for customers who need to shop on a budget, particularly in terms of groceries and other merchandise.
To enhance their offerings, Walmart has recently reduced prices on nearly 7,000 items, citing deflationary trends in general merchandise. Inflation during this quarter was reported to have risen at half the rate compared to the previous year.
Walmart's CEO, Doug McMillon, mentioned during a call with analysts on May 16th that the company's focus on lower prices and the introduction of rollbacks had been well-received by their customers.
Target, another popular retailer, further reduced prices on over 1,500 items including household essentials, pet food, and sunscreen. Target expects further price cuts throughout the summer. On Wednesday, Target reported their sales had declined for the fourth consecutive quarter at stores open for at least one year. This was largely due to the impact of higher prices on their core middle-class customer base.
Similar price cuts were seen at other retailers such as Ikea and Aldi.
While price cuts from retailers are seen as a sign that overall inflation has decreased, some economists argue that to reach the Federal Reserve's 2% target, inflation in other areas must also lessen. Preston Caldwell, senior US economist at Morningstar Research Services, stated that while the price cuts from retailers are helpful, there's still a need to address housing inflation and normalize wage growth.
The median price of a previously owned home in the United States reached a record high of $407,600 in April, a 5.7% increase from the previous year. Wage gains have also slowed but are currently higher than historical averages.
The Fed's efforts to curb inflation have stalled in the first quarter of 2023, leading to speculation that interest rates will not be cut until this fall or even next year. Unemployment in the US remains low, which could potentially lead to more scrutiny on the job market before easing its current restrictive policy.
Recent data suggests that inflation is trending downwards again. Consumer prices saw a 3.4% increase for the twelve months ended in April - a decrease from the 3.5% increase the previous month. However, further details on inflation will be provided with the release of personal consumption expenditure data for April in the coming week.
Spending by American consumers appears to be cooling off - according to recent data, retail sales were unchanged in May compared to April, and declined by 0.6% in March, highlighting a possible reduction in consumer spending.
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The regulatory authorities lessened their penalties by 30% since Citigroup consented to resolve this issue. If not for this reduction in fines, the total penalty would've surpassed £88 million ($112 million).
A Citigroup representative spoke to CNN, saying, "We're satisfied to wrap up this matter dating back over two years, which stemmed from an individual mistake that was caught and rectified within minutes." The organization promptly implemented reinforced mechanisms and continues to uphold complete adherence to regulatory standards.
The spokesperson didn't respond to rumors of a 'fat-finger' error, where the incorrect information is inputted due to a misplaced keystroke.
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In light of Walmart's and Target's price reductions, investors may see opportunities for profit in the retail sector, as lower costs could potentially boost business profits. As inflation slows down due to retailers' price cuts, businesses that rely on affordable goods may experience increased sales and revenue.
Source: edition.cnn.com
