Outpacing inflation

In the last few weeks, many consumer companies have reported quarterly results. In the US, 48% of consumer staples companies and 41% of consumer discretionary companies exceeded analysts' expectations. Among the companies that reported weaker results, one of the factors frequently cited was low demand among lower-income consumers. So how much pressure is there on this lower-income cohort? Unemployment is low, but inflation has been high and that impacts purchasing power. Interestingly, wage growth in four out of the five lowest-paid sectors has outpaced inflation since 2020 and most recently, the one sector that hadn’t kept pace, non-durable goods manufacturing, has been catching up. However, one effect not captured properly is that lower-income consumers are more likely to be renters. While inflation calculations take into account both renting and home ownership costs, we suspect inflation could have been higher for lower-income consumers than headline figures suggest.

Source: US Bureau of Labor Statistics, 2024.