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March 18, 2022
When’s the last time you paid this much to fill up your car?
Or stock up your refrigerator?
It’s been years. So, it really comes as no shock retail sales were only up 0.3% in February, as compared to a 4.9% increase in January.
“Inflation is crimping into household purchasing power,” said Beth Ann Bovino, the U.S. chief economist at S&P Global, as quoted by The Wall Street Journal. “Even if wages are high, inflation for goods is even higher. You want to celebrate that larger paycheck, but you can’t because you can’t buy as much stuff with it anymore.”
Also, consider this.
According to Michael Gelman at the University of Michigan and colleagues’ paper, The Response of Consumer Spending to Changes in Gasoline Prices, gasoline spending was 3% of the household budget when gas prices were at $2.
With oil prices now double that amount, it suggests gasoline spending is now closer to 6% of the household budget. “The research suggests that spending on gas is likely to cause a corresponding drop in spending elsewhere in household budgets working out to approximately be a 3% reduction,” added Forbes.
In response, consumers are gravitating to discount retailers.
Look at Dollar General (DG), for example.
As oil prices gushed from about $90 to $130, Dollar General ran from about $185 to $222 – especially as more Americans become far more frugal. As noted by NBC News, “As inflation continues to push up the price of consumer goods, shoppers from higher income levels are starting to abandon their regular grocery store in favor of a new favorite: the dollar store.”
Shares of Dollar Tree (DLTR) soared from a recent low of about $130 to $155. Even Five Below (FIVE) is starting to push higher after UBS upgraded the stock to a buy rating. All as the discount retailer has become far more appealing with inflation.
In short, even in times of chaos, there’s always an opportunity.
The Dow is down 167 points to 34,193
The S&P 500 is down about 25 points to 4,377.50
The NASDAQ is down 76 points to 14,033.50
Gold prices are down about $10 to $1,934.22
Bitcoin is down slightly to $40,573.83
Oil prices are up $1.17 to $104.20
The VIX down slightly to 26.44
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