Experts say consumer prices will stay high

In January, core consumer prices rose at a rate higher than expected: 3.9 percent, reports The Wall Street Journal. Companies continue to hold consumer prices as wages and expenses continue to take a larger share of profits, however, businesses could also be boosting profits as commodity prices decrease.

“Prices rise like a rocket and fall like a feather,” said Mark Zandi, financial firm Moody’s Analytics chief economist.

The report notes that executives at companies across consumer-facing industries have said in recent earnings calls that they noticed commodity deflation in 2023; however, the only price cuts on the horizon are strategic, and in some cases, businesses are even raising prices.

“Structural inflationary factors such as higher wage rates, transportation costs, and other overhead items are all still supporting higher product costs,” said Tractor Supply chief financial officer Kurt Barton.

Although food prices at grocery stores have stabilized, inflation at restaurants was up 5.1 percent year-over-year in January, above the Fed’s two percent inflation target.

One restaurant chain, Kura Sushi USA, experienced four percent deflation in commodities, but increased prices by nine percent, the company said in early January.

“So with a lot of tailwinds, our pricing, the commodity deflations, the easing of labor inflation, the tailwinds have been great this past year and we fully expect that to continue for the remainder of the year,” said CFO Jeff Uttz in a January 4 earnings call. The company said that labor inflation was up roughly 10 percent in mid-2023 but since these cost increases have ceased, the company expects price increases to level out to an increase of three percent this year. (SFA)