Rachel Askinasi/Insider
Grocery shoppers could start to see some relief after years of rising prices.
Even as inflation has begun to slow down, US households have been feeling the pinch from locked-in costs from when the economy was running hot.
Heading into the new year, some of those prices could start to tick back down, Walmart CEO Doug McMillon said Thursday during the company's quarterly earnings call.
"We think we may see dry grocery and consumables start to deflate in the coming weeks and months," he said.
Just as inflation refers to rising prices, "deflation" refers to prices falling — and even though it may help consumers, it presents a surprisingly tricky challenge for businesses and policymakers.
In contrast to periods of rising inflation in which corporate profit margins typically grow, deflation tends to squeeze companies in a few ways.
For one thing, deflation lowers the prices customers are willing to pay, but it also can cause them to delay purchases in the expectation of further discounts.
Neither is particularly comfortable for businesses (or central bankers), which is why the discussion is about keeping inflation positive and under a target, rather than flipping the switch into deflation.
Having said all that, a little deflation can be a helpful thing.
"While that would put more unit pressure on us, we welcome it, because it's better for our customers," McMillon said.
John Furner, president of Walmart US, pointed out on the call that a Thanksgiving meal from the company will cost less this year than last year. "We worked really hard the last two years to keep it flat, and it's coming down."
Walmart's comments are consistent with a recent report from Rabo Research that prices for commodities like coffee, sugar, and soybeans should come down in 2024.
The upside of falling food prices for Walmart — more than say Kroger or Albertsons — is that Walmart sells a whole lot more than groceries.
"If the food prices come down," McMillon said, "that'll free up dollars to be spent in general merchandise."
