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Retail prices drop as cost of groceries stays high

Consumers are seeing a lot of price increases in basic necessities, and experts say that's impacting their spending habits.
The Macy's store at Union Square
Posted at 8:01 PM, May 09, 2024
and last updated 2024-05-09 20:01:04-04

Consumers are paying closer attention to their budgets these days, and many retailers are responding by lowering prices on non-necessary discretionary goods like clothes, furniture and decor.

"We are spending more on groceries," said Kishore Kulkarni, professor of economics at Metropolitan State University of Denver. "And because we are spending a whole lot more there, consumers are spending less in the shopping mall."

"People are switching up where they shop in order to stretch their budgets a little bit farther," said Claire Tassin, retail and e-commerce analyst at Morning Consult.

Last month, craft store Michaels announced it would lower prices on more than 5,000 items. The Swedish furniture store IKEA told CNN earlier this year it was reintroducing price reductions on several of its products. And the CEO of H&M announced during a recent earnings call that the clothing chain expects to have lower prices compared to the beginning of the year.

A person walking by a Rue21 store in South Carolina.

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"They're really just having to offer more competitive prices and more discounts to win the sales," said Tassin.

Experts have seen some rises in discretionary spending.

According to a Thursday report from the National Retail Federation, retail spending was higher than last year for online stores, health and personal care, building and gardening supplies, clothing and accessories and general merchandise.

But Kulkarni says this won't last long.

"The effect is going to be temporary," he said. "In a few months or so, we will go back to our old ways."

According to the Consumer Price Index, grocery store prices were 1.2% higherin March compared to last year — and that might change too.

"Big supermarkets like Target, Costco, Walmart, if they take the lead, I think grocery prices can stabilize, if not come down," said Kulkarni.

The discount supermarket chain Aldi announced recently it would drop prices on over 250 items in the next couple months. The company said this could save shoppers around $100 million.