Is Cooling Inflation Really Shaping Consumer Buying Behavior?

Inflation in the U.S. reached its highest rate in four decades at 6.6 percent in 2022, and as prices rose, consumers were naturally expected to shift gears and slow down on spending. A record-setting holiday season for retail sales assuaged some of those concerns. Couple that with the most recent CPI report, which had some positive news; inflation cooled by 0.1% month-over-month and landed at 6.5% in December. Slowing inflation usually means consumer buying behavior is going to grow more bullish. But has it?

Data is mixed on the subject. According to recent data, the impact of inflation on the average consumer may have higher effects depending on their location. As explained, inflation is also seeing a decline, but it’s not exactly telling the full story on the buying behavior of consumers. Consumers are still buying amid inflation, but they just might be buying less of their staple purchases. In fact, they’re actually buying cheaper versions of items they would normally buy, making less frivolous expenses and less shopping trips.

Examining consumer buying behavior is essential to helping companies better understand stocking their inventories with what it needs and what it doesn’t. But there’s a challenge with that. Leigh Chesley, Chief Customer Officer at end-to-end warehouse solutions company Longbow Advantage, said uncertainty surrounding consumers evidently impacts the supply chain in more ways than one, and she explored how companies are responding to this shift.

Leigh’s Thoughts

“Although inflation does seem to be cooling, we’re finding that consumers’ buying behavior is really not changing as much compared to a year or so ago. So, while people might be buying — continuing to buy, they’re buying less of the same thing, or they’re making different purchasing decisions and buying things at different price points.

Consumer buying behavior tends to be somewhat unpredictable. We’re seeing that warehouse levels are higher again than pre-pandemic levels as warehouses and companies are having to make different supply and demand forecasts, and somewhat look at much more historical data as opposed to even a month or so ago.

And while again, while we’re seeing that inflation is slowing, it’s definitely a positive thing. It hasn’t necessarily gotten to the point that it’s creating predictable buying behavior.”

Article written by Alexandra Simon.

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