For the fourth consecutive month, inflation slowed in October and while the market reaction happened instantly, data and history suggest the consumers' response will be much slower and far less impulsive.
Officially, The U.S. Bureau of Labor Statistics reported overall inflation fell to 7.7% in October versus a year ago, bringing the closely watched benchmark to a 9-month low, albeit still at levels not seen in decades.
At the same time, new PYMNTS research shows the effect of inflation is still terrorizing most consumers, not only changing what and how they shop but also how they feel as expectations for relief from price increases and wage stagnation are unlikely to change soon.
According to the November report, Consumer Inflation Sentiment: Inflation’s Long Consumer Spending Shadow, “Rising prices continue to be the greatest economic concern, with two in every three consumers very or extremely concerned about the outlook for the coming months. Eight out of 10 concerned consumers say inflation causes them to feel worried about the future, while 45% say difficulty paying their bills has soured their outlook.”
Get the Study: Consumer Inflation Sentiment: Inflation’s Long Consumer Spending Shadow
Wages and Worries
Compounding consumers’ grim outlook is the fact that wage gains are doing little to help.
Per the latest New Reality Check: The Paycheck-To-Paycheck Report: Employment Edition report, a PYMNTS and LendingClub collaboration, “48% of workers state their incomes have remained unchanged over the course of the last year and just 14% say their earnings grew on par with or exceeded inflation in that same period.”
See It Now: New Reality Check: The Paycheck-To-Paycheck Report: Employment Edition
For their part, retailers continue a strategy of sales events and deep discounting to stem losses from consumer pullbacks and trade-downs. That includes the biggest brands in eCommerce, with Amazon shares falling 11% after a weaker-than-expected third quarter.
“The continuing impacts of broad-scale inflation, heightened fuel prices, and rising energy costs have impacted our sales growth as consumers assess the purchasing power and organizations of all sizes evaluate their technology and advertising spend,” Amazon CEO Brian Olsavsky said on the most recent earnings call.
Read: Amazon Looks to ‘Subscribe and Save to Boost Branded Partnerships and Grocery Spend
Retail bellwether Walmart will report its Q3 results on Nov. 15. Pre-earnings analysis from Seeking Alpha reported that “[Walmart] is better positioned to weather the uncertainties ahead,” noting that its vast network of physical stores, often viewed as a liability by many analysts, will be a valuable and irreplaceable advantage.
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