Ex-Walmart CEO warns of persistent inflationary pressures affecting consumers’ purchasing power, food, and rent.
A former CEO of a major US retailer has confirmed the worst worries of ordinary citizens by describing how inflationary pressures are here to stay.
Former Walmart U.S. President and CEO Bill Simon said on Wednesday that inflation has been “a killer on the consumer, especially food and rent.” Just terrible,” she said. It’s a huge obstacle to go beyond.
Simon, who began working for Walmart in 2006, shortly before the United States experienced its last major economic crisis, recently shared his thoughts on why inflation is a greater threat to consumers’ wallets than a potential recession.
It is difficult to imagine what a recession may look like until we start to see major changes in the labor market. The country has never had a recession with 100% employment, the former CEO remarked. Inflationary pressure is greater than recessionary pressure, in my opinion, because employment levels are still pretty high and wage growth year over year is relatively high.
This week, Fannie Mae released their economic and housing outlook report, in which they revealed their predictions for a recession by the end of 2023. Simon, however, brought up the moderate recession estimates made by analysts and the country’s track record of recovery.
If the unemployment rate increases to 8% or 6%, for example, that means that 6% of the population has been negatively impacted since they are no longer employed. Simon made the observation that “if food inflation is 20%, everyone loses 20% of their purchasing power.”
He then said, “And so it’s a much bigger impact.” Consumers are hit more by inflation.
The previous head of the company claimed that major changes in consumer behavior were common during recessions. Consumers are opting for smaller quantities of cheaper meats like chicken and avoiding bulk purchases.
Shoppers “trade down” while deciding where to spend their money.
The pain of shopping in a crowded big-box store is an unavoidable cost of convenience. You have to go to more trouble to obtain a better deal,” Simon added. When circumstances are good, people prefer less congestion and smaller structures, but when things are tough, everyone heads to Walmart. People who normally wouldn’t shop at the large box do so because of the low prices.
Simon recalled a time when he had done a focus group with mothers about healthy eating, and one of them had apologized for choosing a Happy Meal with toys for her child rather than a skinless chicken breast because she couldn’t afford the former.
“There are some incredibly tragic things you witness,” he reflected. I’ll never forget the scene in the grocery store at the stroke of midnight on the first of the month: customers load up their trolleys, then wait until the EBT cards are charged to make their purchases.
Despite his pessimistic inflation forecast, Simon called himself a “eternal optimist” about the American dream and the Federal Reserve’s ability to bring inflation under control.
The previous CEO predicted that “at least a couple more quarter points for the year” will be seen, adding, “I would expect that based on what the Fed has said.” They’re making fighting inflation a top priority, therefore they should be given credit for turning the corner here.
But he’s still waiting for help with food and housing prices, the two biggest drains on the average American’s budget.
Those are the two issues which have not been resolved as of yet. Those are the questions I’d ask myself, such as “what can the Fed do?” The question is, “What policy?” “Simon said.” To paraphrase, “Potential policy is probably more local than it is federal.”
Politics “creates a lot of noise” about inflation, but Simon told Americans that taking action is the best way to get through it.
The former Walmart executive added, “Inflation is driven by more demand than there are goods, and ultimately, we can manage our budgets, cut our expenses, and figure out a way to make it through to the other side.” If we all begin to reduce our consumption in some areas, then the market will respond by lowering prices.
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