US retail giant detects shift in customer behavior that typically indicates recession.

Is a Recession Looming? American Retail Giant Notices Change in Customer Behavior

A top executive at Costco has warned that consumer behavior could be a sign of a looming recession. During a call with investors, Chief Financial Officer Richard Galanti noted that shoppers are opting for lower-priced pork or chicken instead of red meat, a trend that has been common in past recessions. He also observed that canned meat and fish are selling better than fresh meat, which is more expensive.

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Galanti also offered two other indications that consumers are feeling the pinch. Firstly, the company is seeing an increase in its store brand, Kirkland, which is usually lower-priced than national brands. Secondly, the average transaction at Costco is down 4.2 percent globally and 3.5 percent in the United States.

Galanti’s comments are supported by a recent Federal Reserve report, which noted that consumers have been cutting back. “Nearly two-thirds of adults stopped using a product or used less because of inflation, 64 percent switched to a cheaper product, and just over one-half (51 percent) reduced their savings in response to higher prices,” the report said.

Analysts say that there are signs of economic clouds on the horizon. Ethan Harris with Bank of America said, “I’d be surprised if there aren’t more layoffs,” adding that rising interest rates could trigger the move. JPMorgan Chief Operating Officer Daniel Pinto also sees warning signs, stating that “there will be a recession at some point, but I don’t see, for the moment, a crisis. It’s just a slowdown in the economic cycle to deal with inflation.”

David Trainer, CEO of New Constructs, believes that Walmart’s sales will be the best predictor of a recession. “Walmart is a bellwether for consumer spending and health, which is not in dire straits, but it is weakening,” Trainer said. He added: “Walmart’s earnings add to the idea that a recession is not fully here yet but is likely coming, albeit more slowly and less severe than most expect.”

Conclusion

As consumer behavior shifts towards lower-priced products, and with Walmart’s sales weakening, there are signs that a recession may be on the horizon. While analysts predict that it may not be as severe as previous recessions, it’s important to be aware of the potential economic challenges ahead.