Projected Inflation Trends and Their Effects on Consumer Spending in 2024

Projected inflation rates for 2024

Projected inflation rates for 2024 are expected to remain low, as indicated by Amazon's report of lower inflation contributing to significant operating income growth. Conversely, JPMorgan anticipates flat growth on an inflation-adjusted basis, suggesting cautious consumer spending amid stable inflation expectations.

"I'm happy to report that through all our hard work, combined with strong demand from our dedicated customer base and lower inflation, all this resulted in 2023 operating income of $37,000,000,000 more than triple 20 22's operating income of $12,000,000,000 There are 3 primary drivers for this improvement: First, in stores, our focus on reducing cost to serve, which benefited from our shift to a regionalized fulfillment network." --- (AMZN, event transcript, 2024/05/22)

"So as we think about this $3,600,000,000 going forward, we would expect the growth to be closer to flat on an inflation adjusted basis." --- (JPM, event transcript, 2024/05/20)

Historical inflation trends and consumer behavior

Historical inflation trends have led to notable shifts in consumer behavior, including conscious product switching due to inflationary pressures. While inflation remains a concern, it is moderating, and consumers are showing resilience, adapting their spending habits in response to economic uncertainties.

"And even as inflation moderates and we see sequential improvement in discretionary category trends, higher interest rates, uncertainty around the future of the economy, continued social and political divisiveness and the upcoming election cycle have consumers concerned about what lies ahead." --- (TGT, earning call, 2025/Q1)

"Certainly, has been some inflation and put pressure on consumers. And what we've really noticed, this started in early 2022, was some conscious switching amongst products and you can see that pronounced suddenly in the store, but based on what people are having delivered and our flexibility, convenience and other things that we have improved over the last few years have made a difference on our ability to serve more of our existing customers more often with more units and then meet some new customers as well, which is great." --- (WMT, conference, 2024/06/11)

"What we're seeing is that globally, consumers remain resilient. And while inflation is still heightened, it is moderating." --- (KO, event transcript, 2024/05/01)

"business has, we’ve talked about resuming volume growth in most of the major markets and doing that while building margin and simultaneously increasing our investment in these kinds of things, and I don’t see any reason in a--if we do find ourselves in a more difficult environment from a consumer economic standpoint, one of the things we talk about internally is would we change our approach if we either had confidence that things were going to get remarkably better from a consumer standpoint or remarkably worse from a consumer standpoint, would we not want to be in daily use categories where performance drives brand choice?" --- (PG, earning call, 2024/Q4)

"On the inflation front, it's more of the same from last quarter. Across all core merchandise, inflation was essentially flat in Q3, with fresh foods close to zero and slight inflation in food and sundries being offset by some deflation in non-foods." --- (COST, earning call, 2024/Q3)

Consumer sentiment and spending behavior

Consumer sentiment in 2024 is marked by caution, particularly among lower-income groups feeling financial stress. Brands like McDonald's and Amazon report shifts towards value-seeking behavior, with consumers prioritizing non-discretionary spending and lower-priced products, reflecting a significant impact of inflation on spending habits.

"Trial rates of the deal are highest amongst lower-income consumers and sentiment towards the brand around value and affordability has begun to shift positively. To date, 93% of our restaurants in the US have committed to extending the offer even further into the summer." --- (MCD, earning call, 2024/Q2)

"And we talked about the fact that the lower income consumer is feeling a little bit of stress." --- (DIS, earning call, 2024/Q1)

"Consumers being careful with their spend, trading down, looking for lower ASP products, looking for deals." --- (AMZN, earning call, 2024/Q2)

"Many consumer pocketbooks are still stretched, and we see the effect of that in our business mix, as they're spending more of their paychecks on non-discretionary categories and less on general merchandise." --- (WMT, earning call, 2025/Q1)

"And I would point out consumer sentiment in most of our major markets remains low." --- (MCD, earning call, 2024/Q2)

Sector-specific impacts and corporate responses to inflation

Inflation is prompting varied sector-specific responses. Retailers like Walmart and Target are grappling with rising costs and adjusting operational strategies, while energy companies like Chevron and ExxonMobil focus on supply chain management to mitigate inflation's impact. These adaptations reflect a broader trend of companies navigating inflationary pressures.

"Other Information ." We expect continued uncertainty in our business and the global economy due to inflationary trends, a challenging macro environment, geopolitical conditions, supply chain disruptions, volatility in employment trends and consumer confidence." --- (WMT, sec filing, 2025/Q1)

"Supply Chain and Inflation Impacts The company is actively managing its contracting, procurement, and supply chain activities to effectively manage costs and facilitate supply chain resiliency and continuity in support of the company’s operational goals." --- (CVX, sec filing, 2024/Q1)

"The total change between periods in expenses below will reflect both Structural Cost Savings and other changes in spend, including market factors, such as inflation and foreign exchange impacts, as well as changes in activity levels and costs associated with new operations, mergers and acquisitions, new business venture development, and early-stage projects." --- (XOM, sec filing, 2024/Q2)

"On the SG&A line, we saw a rate increase of about 130 basis points in the first quarter, reflecting the deleveraging effect of a decline in sales, combined with the impact of multiple cost increases, including compensation and benefits for our team and higher marketing expense to support the launch of Target Circle." --- (TGT, earning call, 2025/Q1)

"The increase in gross profit rate for the three months ended April 30, 2024 was primarily due to lapping inflation related LIFO charges in the prior year, and lower markdowns as a result of disciplined inventory management." --- (WMT, sec filing, 2025/Q1)

Discretionary vs. non-discretionary spending trends

Discretionary spending is showing positive trends, particularly in categories like apparel and beauty, as noted by Target and Walmart. Conversely, non-discretionary spending remains cautious due to inflationary pressures, with Costco emphasizing value delivery in essential categories to maintain consumer engagement.

"We also saw improving trends across our discretionary categories, most notably in apparel, and we're seeing continued strength in beauty." --- (TGT, press release, 2024/08/21)

"Could you speak to some of the innovation you're seeing in non-foods and anything else you think is driving some of the performance, particularly in discretionary categories." --- (COST, earning call, 2024/Q1)

"Now to me, like that group maybe wasn't obvious to me that they would have the amount of discretionary income to pay for a membership." --- (WMT, conference, 2024/09/11)

"And so if you think about the three main categories in core between foods and sundries, fresh and non-foods, fresh would have continued to have been slightly lower year-over-year, and that's a very deliberate strategy for us to make sure we're delivering more value for the member, and we think that's a really important place for us to drive member engagement and support, especially as we're still seeing some commodities that are a little bit inflationary right now." --- (COST, earning call, 2024/Q1)

"Recent commentary has been very positive in some of the more discretionary categories, including, as you mentioned earlier, home and apparel, even with some pretty severe macro pandemic headwinds." --- (WMT, conference, 2024/06/11)

Corporate pricing strategies in response to inflation

Corporate pricing strategies are increasingly adaptive to inflationary pressures. Companies like Coca-Cola and Procter & Gamble emphasize value-driven pricing and market responsiveness, while Costco actively adjusts prices in real-time. Walmart notes a slower inflation impact, suggesting varied strategies across sectors to maintain competitiveness.

"Please do take in mind that the price mix is heavily affected by the Argentinian high inflation and two-thirds of the price mix is actually, due to Argentina. So that leaves you about roughly 6% for normal inverted e-commerce pricing for the rest of the countries." --- (KO, earning call, 2024/Q2)

"Superior innovations that are driven by deep consumer insights, communicated to consumers with more effective and efficient marketing programs, executed in stores and online in conjunction with retailer strategies to grow categories and our brands and priced to deliver superior value across each price tier where we compete." --- (PG, earning call, 2024/Q4)

"The first is that overall inflation level for the business was up about 40 basis points for the quarter, that's half the rate of increase that we saw last year." --- (WMT, earning call, 2025/Q1)

"I mean, we are competitive on a daily basis. Our buyers are on top of pricing daily, weekly and we all review them each month." --- (COST, earning call, 2024/Q1)

"So, the EMEA segment has a substantive piece of pricing that is the inflationary marketplaces, including many markets you wouldn't normally suspect." --- (KO, earning call, 2024/Q1)

Future outlook for consumer spending in 2024

In 2024, consumer spending outlook appears mixed. Walmart's investments aim to enhance customer experience, while Amazon's successful Prime Day indicates strong engagement. However, McDonald's declining U.S. sales suggest potential challenges, contrasting with Target's stable category sales, reflecting varied consumer preferences and spending trends.

"The increase for the three months ended July 31, 2024 was primarily due to planned investments in associate wages and new-store operating costs in the Mexico and Central America market, partially offset by operational efficiencies in eCommerce and ongoing format mix shifts." --- (WMT, sec filing, 2025/Q2)

"That’s a wrap on Prime Day 2024! Thanks to all drivers and employees for delivering smiles, and all of our customers for being the best. 🤗📦🎉 https://t.co/qUGVgcn9ZL" --- (AMZN, Twitter post, 2024/07/18)

"1 COMPARABLE SALES Increase/(Decrease) Quarters Ended June 30, 2024 2023 U.S. (0.7)% 10.3% International Operated Markets (1.1) 11.9 International Developmental Licensed Markets (1.3) 14.0 Total (1.0)% 11.7%" --- (MCD, press release, 2024/07/29)

"Quarter Ended % Change Better (Worse) (in millions) March 30, 2024 April 1, 2023 ESPN Domestic $ 870 $ 701 24 % International 43 46 (7) % 913 747 22 % Star India 37 34 9 % $ 950 $ 781 22 % The increase in domestic ESPN advertising revenue was primarily due to increases of 15% from higher rates and 3% from higher average viewership." --- (DIS, sec filing, 2024/Q2)

"Sales by Product Category Three Months Ended May 4, 2024 April 29, 2023 Apparel & accessories 16 % 16 % Beauty 13 12 Food & beverage 24 24 Hardlines 13 14 Home furnishings & décor 15 15 Household essentials 19 19 Total 100 % 100 % Note 2 to the Financial Statements provides additional product category sales information." --- (TGT, sec filing, 2024/Q1)

Impact of inflation on savings and investment behavior

Inflation is significantly impacting consumer savings and investment behavior. Rising living costs strain household budgets, leading to poor investment choices. Additionally, inflation influences spending decisions, affecting how consumers allocate their finances across different categories, ultimately shaping their overall financial strategies.

"Of our non investment grade exposure, 70% is secure. In the past year, we've clearly seen the impact of higher labor costs, baseline inflation, interest rates along with elevated geopolitical and market uncertainty and through all of this, any stressful losses that we have seen to date have been idiosyncratic or concentrated in sectors that we've been watching closely." --- (JPM, investor day, 2024/05/20)

"If uncertainty and concerns about geopolitical tensions and the economic outlook remain elevated or grow, including those about central bank policy, inflation, the commercial real estate sector, and potential increases in regulatory capital requirements, it may lead to a decline in asset prices, a decline in market-making activity levels, or a decline in investment banking activity levels, and net revenues and provision for credit losses would likely be negatively impacted." --- (GS, sec filing, 2024/Q1)

"This lack of understanding can lead to poor investment choices and inadequate savings strategies.Rising Cost of Living: The increasing cost of living, particularly in major urban centers, significantly burdens household budgets." --- (V, press release, 2024/08/19)

"And that affects consumers in different ways. If you see inflation in non-carded verticals, that's going to impact your payment decisions or your spending decisions on carded verticals and so forth." --- (MA, earning call, 2024/Q1)

"flat on an inflation adjusted basis. However, the mix between the categories and lines of business will naturally change over time as investments roll off and our strategic priorities evolve. So with that," --- (JPM, investor day, 2024/05/20)