NEW YORK (AP) — Cracks are appearing in the resilient spending of American households, one of the main pillars protecting the economy from recession.
Consumer goods giants from PepsiCo to Kraft Heinz recently explained how the combination of high inflation and rising interest rates is hurting low-income customers.
Although not as much as before, it’s the result of high inflation, which has made everything more expensive, combined with the effects of higher interest rates due to higher credit card and other payments.
The remarkable recovery in overall spending among U.S. consumers has been one of the main reasons the economy has been able to avoid recession, at least so far. The capitulation of the bottom of the economy could be the first crack in the economy.
“Low-income consumers in the U.S. are at their limit,” PepsiCo CEO Ramon Laguarta said late last month, when the company reported higher-than-expected profits. And it’s the consumer who is making a lot of choices about what to buy and where to buy it.”
On Tyson Foods’ conference call to discuss better-than-expected results for its latest quarter, one of the first questions from Wall Street analysts was to ask company executives what they thought of the current state of U.S. consumers. The purpose was to explain what was going on. .
“As you know, consumers, especially low-income households, are under pressure,” Chief Growth Officer Melanie Bolden said.
The company, a producer of beef, pork, poultry and prepared foods, is seeing a shift in customers from fine dining to quick-service restaurants, she said. We’re also seeing customers move from less expensive restaurants to eating at home.
Carlos Arturo Abrams-Rivera, CEO of Kraft Heinz, also said lower-income customers are leaving restaurants and convenience stores. That’s despite the fact that high-income earners buy more Kraft Heinz products because they spend more on travel and entertainment.
Luca Zalamera, Mondelez International’s chief financial officer, recently told analysts that U.S. sales of some products that are particularly popular with low-income households, such as Chips Ahoy cookies, have been weak.
Most of the recent comments have come from major food and beverage companies, but several retailers are expected to join in the coming weeks. Companies like Walmart and Dollar General will provide further evidence of how low-income Americans are faring.
Of course, it’s not just the lowest-income households that are suffering from soaring prices for seemingly everything.
After reporting the company’s latest quarterly results, McDonald’s CEO Chris Kempczinski said, “We live in an environment where consumers are experiencing price discrimination, but this is only a problem for low-income people.” Not,” he said. “I think all consumers want good value and affordability, so we’re focused on that behavior.”