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Don’t waste another dime on bloated channel reporting and vanity metrics.
Don’t waste another dime on bloated channel reporting and vanity metrics.
Rising food and apparel prices kept the price pressure on the US economy in August.
Inflation continues to rise.
Gas prices are coming down, but spiking costs of food and other goods are keeping inflation marching upward at stubbornly high rates. In fact, prices ticked back up in the latter part of the summer after a brief period where they appeared to be falling.
Those are the main takeaways from August reports on inflation across the US economy. With each passing month of price increases, the road to bring inflation down will get longer, and potentially more arduous.
For a snapshot of where we are now, here’s a look at the latest data from the US Consumer Price Index, and Adobe’s Digital Price Index, plus a brief look at household incomes:
In August, US inflation rose 8.3% over the previous year, according to the Consumer Price Index from the US Bureau of Labor Statistics. This was down slightly from the 8.5% increase recorded in August, keeping inflation at 40-year highs, but now below the record pace of 9.1% recorded in June.
While downward is the motion that many want to see, there were signs in the report that inflation is sticking around. Month-to-month, inflation increased 0.1% over July, according to the CPI. Economists had expected this metric to decrease by 0.1% for the month, according to CNBC. The monthly reading was unchanged for July when compared to June, so it’s actually a sign that some of the price increases are ticking back up.
There are also signs of shifts in certain categories, indicating that no one sector will bring us out of this. During this monthslong bout with inflation, consumers have paid more for gas and food. Now, those prices appear to be heading in opposite directions, while the cost of living is still generally going up.
Further underscoring how those categories outside of gas are increasing, core inflation, which sets aside volatile food and gas prices, was up 0.6% month-over-month after rising 0.3% in July. For the year,
The shelter index was also up 0.7% in August, compared to 0.5% in July. This index, which includes rent prices, rose 6.2% over the last year. That accounts for about 40% of the total increase in the core inflation rate, per the CPI.
In other consumer goods categories, household furnishings increased 1% in August, personal care increased 0.6% and apparel increased 0.2%.
The inflation data arrives just over a week before the Federal Reserve is set to announce its latest decision on whether to increase interest rates. At its last meeting in July, rates were increased 0.75% for the second straight month. Chairman Jerome Powell has since given speeches hammering the point that the central bank is set to keep taking action until inflation is back down to the Fed’s desired year-over-year inflation rate of 2%. The message from this month’s CPI appears to be that there’s a long way to go to get there. The Fed has said it will make decisions based on the latest data, and this doesn’t appear to change much.
“We must keep at it until the job is done,” Powell put it this way at a speech in Jackson Hole, Wyoming.
Even though sticker shock at the pump may start to recede, consumers will still be facing higher costs at the grocery store and in monthly housing and utility bills. That could keep eating into discretionary funds available for other purchases. This could have a cumulative effect during the holidays, which is typically peak season for retailers as people are buying for both themselves and others. On Tuesday, Deloitte released a new forecast that holiday retail sales will rise between 4% and 6% in 2022 when compared to the prior year, which would under the inflation rate. However, the price-conscious environment could push consumers to seek deals online, where Deloitte is forecasting a sales increase of 12.8% to 14.3% in 2022.
"As inflation weighs on consumer demand, we can expect consumers to continue to shift how they spend their holiday budget this upcoming season," said Nick Handrinos, vice chair of Deloitte LLP, and US retail, wholesale and distribution and consumer products leader, in a statement. "Retail sales are set to increase as a result of higher prices, and this dynamic has the potential to further drive ecommerce sales as consumers look for online deals to maximize their spending. Retailers across channels who remain aligned with consumer demand and offer convenient and affordable options can be well positioned for success this season."
(Courtesy of Adobe Analytics)
Online inflation was back on the rise in August after entering deflation in July. Ecommerce prices rose 0.4% year-over-year and 2.1% month-over-month, according to the Adobe Digital Price Index. In July, online prices had dropped 1% year-over-year.
The return to rising prices was driven by the following categories:
A continued surge in grocery prices drove the return to rising inflation in digital commerce. The food category’s inflation increased 14.1% year-over-year, marking a new record high. Online grocery prices tend to more closely mirror those in the CPI than other ecommerce categories, and prices in this area have been on the rise for 31 straight months in a similar pattern to the wider economy. It's the category to watch for price spikes, no matter where you're selling.
A rise in apparel prices was also a big contributor to online inflation, increasing 4.9% year-over-year and 8.7% month-over month. Prices in this category were down 1% year-over-year in July as a result of discounts offered for back-to-school season, and markdowns made by big retailers as they sought to work through a glut of inventory. Adobe notes that this category tends to be more seasonal, as retailers offer discounts in certain months to make way for new inventory.
Personal care products also rose 2.7% year-over-year. This was the highest year-over-year increase in the category since March 2021, when prices were up 3.6% year-over-year.
“Demand for personal care products has risen in tandem with online grocery shopping, as the two categories often share the same ecommerce basket,” Adobe writes.
Falling consumer electronics prices continue to buoy the overall rise of inflation. Electronics prices in August were down 10% year-over-year, which outpaced the average of 9.1% in the five pre-pandemic years. Meanwhile, computer prices were down 12.6% year-over-year, which was the largest drop since the onset of COVID-19 quarantine measures in March 2020.
Despite rising prices, demand remains elevated. Adobe said the $64.6 billion spent in August was a 6.5% year-over-year increase. Continued spending will also play a role with inflation, as brands and retailers won’t see as much reason to drop prices.
“The modest uptick we see in online prices for August was driven in large part by rising food costs that show no signs of abating, just as seasonal discounts in a category like apparel phased out through the end of summer,” said Patrick Brown, vice president of growth marketing and insights at Adobe, in a statement. “Consumer demand for ecommerce also remains steady and will keep prices elevated, especially for growing categories such as groceries, pet products and other consumer staples.”
Digital prices by category. (Courtesy of
US household incomes didn’t get any larger in 2021, and they didn’t get any smaller either.
According to the US Census Bureau, real median income was $70,784 in 2021. This was “not statistically different” than the 2020 total of $71,186.
The Bureau’s estimates are adjusted for inflation. This latest reading came on a year when inflation rose 4.7%. That was already the largest annual increase in the cost-of-living adjustment since 1990, even as it came well before the worst months of inflation that have set in during the middle part of 2022.
Income levels can help to paint a picture of how much consumers have to spend. But as this year has reminded us, it’s one of a number of factors in the equation, alongside costs and expenses. The question surrounding inflation is whether the uptick in costs will outpace rising incomes, leading people to ask for higher wages, which in turn keeps prices higher. That’s an upward spiral the Fed wants to avoid, but the central bank has the difficult task of breaking the cycle without wrecking the economy in the meantime, so the change won’t all come at once. The question this time next year when this measure is released will be whether a period of inflation arriving during a hot job market has led to any meaningful change in income.
Here are some more facts on 2021 income and poverty from the Census.
On average, customers spend $59 more than the value of their gift card, Fiserv found.
In retail, sales are often measured in goods, whether they are purchased for ourselves or someone else. There are plenty of strategies that brands and retailers use to increase those sales, whether it is marketing, loyalty programs or how that item is presented.
In most cases, these are two different parts of the equation for retailers: The product that is bought and the strategies that lead to the purchase.
That’s what makes the gift card unique.
It is an item you can buy, with a section in the store all its own. Eventually, it leads to the purchase of other goods, so the gift card is leads to a direct sale. Yet it’s also a means to build a retail brand and create incentives that both introduce customers to a store and keep them coming back.
That’s a key takeaway from the 20th Annual U.S. Prepaid Consumer Insights Study from fintech and payments company Fiserv.
At this point, the gift card feels like a staple of the shopping experience. But it is only about 30 years old. In 1994, Blockbuster Video pioneered the sale of cards for gifted purchases directly as a means to combat fraud in paper gift certificates. Since then, they’ve proven to have a multitude of uses that stretch beyond the holidays.
Starbucks and Amazon gift cards are commonly distributed as prizes at team-building events and as pick-me-ups by friends showing they care. In 2022, 60% of consumers said they received a gift card from an employer, according to the Fiserv report. That was a big increase from 32% in 2019. People appreciate the gesture. The survey found that 85% of employees think that gift cards from an employer make for appropriate incentives.
For people looking to show generosity, gift cards can also be a means to stretch dollars. At a time of high inflation, people are looking for deals with their discretionary purchases. Gift card promotions that offer discounts and bonuses are proving particularly popular, the study found. Two-thirds of consumers said promotions can influence them to purchase more, while more than half of consumers took advantage of such an offer in 2022.
Yet the more difficult consumer environment is also having an impact on overall gift card sales. In 2022, the growth of gift card purchases slowed.
“Overall, 56% of U.S. consumers purchased more gift cards in 2022 compared to 2021,” said Tom Niedbalski, VP of gift solutions at Fiserv. “This was a decline from the 73% of consumers who said they bought more gift cards in 2021 than they did in 2020.”
Inflation and less discretionary income were the driving factors for consumers who said they bought fewer gift cards during 2022, as 35% of consumers said inflation was the reason they were purchasing fewer cards.
It's important for brands and retailers to understand why consumers buy gift cards. But it's just as crucial to understand where they can fit in retail strategy. Beyond sales, gift cards can help drive repeat customers, and extend a brand. These tools are particularly valuable at a time when retailers are focused on profitability in a tougher consumer environment.
Fiserv explained four areas in which gift cards are of particular value for brands.The following is directly quoted from Niedbalski:
Improving cash flow and revenue. Gift cards not only drive in-store and online traffic, there is an associated “lift,” or overspend, when a gift card is converted into a sale. On average, customers spend $59 more than the value of their gift card.
Repeat customers. Retailers use gift cards to foster loyalty and customer engagement, ultimately leading to repeat customers. One way we see this play out is through promotions associated with gift card sales. For example: a consumer who buys a $100 gift card for the holidays will receive a $20 bonus card that can be used after January 1 – creating a pre-holiday sale and post-holiday transaction in the New Year.
Branded currency. A gift card places a merchant’s brand directly into the consumer’s wallet, increasing brand awareness and ensuring the merchant’s brand is with the consumer when they are looking to buy.
Year-round marketing. The gift card has grown beyond the traditional holiday season. From birthdays and graduations to anniversaries and babies, gift cards are becoming the most popular way to recognize milestones – giving retailers opportunities to run additional promotions throughout the year.