March Begins Bearish
The saying goes that March comes in like a lion and out like a lamb, but independent grocers are showing that it’s starting more bearish, with same store sales down 3.15 percent in the first week of the month. Customer counts were down 2.53 percent.
This week the Bureau of Labor Statistics released its consumer price index report for February, which showed that food at home prices decreased 0.2 percent over the course of the month. All six of the food-at-home subcategories declined in February: fruits/vegetables (-0.5 percent), dairy (-0.3 percent), meat/poultry/fish/eggs (-0.2 percent), cereal/bakery (-0.1 percent), nonalcoholic beverages (-0.1 percent), and other (-0.1 percent).
Over the past 12 months, food at home prices have increased just 0.5 percent, the first slowing of the pace of increases since 2015.
CPI has been stubbornly slow for an extended period of time as other economic indicators such as unemployment, consumer confidence, and GDP improve. Given the healthy overall state of the economy, it seems likely that the Federal Reserve will continue to gradually increase the federal funds rate. Before the financial crisis in 2008, the federal funds rate was at 4.5 percent, but after the crash, the Fed lowered the rate to near 0 (0.25 percent), where it stood for years.
Now that the economy has shown prolonged improvement, the Fed has been gradually increasing it a quarter percent at a time and it currently stands at 1.5%. As interest rates gradually increase, it could begin to help inflation get back to healthy levels – around 2 percent or so. While inflation and sales have been a struggle, there is some hope of better things to come.