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This is Planet Money from NPR.

0:21

Adrian, I don't know how often you

0:23

frequent your local supermarket, but

0:25

grocery prices are not okay right

0:27

now. It's like over six bucks

0:29

for a family-size box of Cheez-Its,

0:31

which, you know, that's my personal

0:34

barometer for inflation. Oh my gosh, that

0:36

is a barometer of inflation that I understand.

0:38

Though, truthfully, I'm a Cheez

0:40

Nips person, more than a Cheez-Its

0:42

person. I think they taste less

0:45

healthy. Yeah, no, that's important. The

0:48

struggle is real, though. Grocery prices have gone

0:50

up 25% since January 2020, and

0:53

that's outpaced the increase in inflation overall.

0:56

And grocery prices hold a kind

0:58

of special place in our economics

1:00

brains. We feel the pain of

1:02

inflation every single time we pay

1:04

those new higher prices week in,

1:06

week out, and pretty much everyone

1:08

shops. Yeah, and just contrast

1:10

that with some of the positive data points right

1:12

now, like rising wages.

1:15

If you get a cost of living pay adjustment, maybe

1:17

it feels great when you first hear about it, but

1:19

then it gets direct deposited in your bank

1:21

account, and you kind of stop feeling it

1:23

week in and week out. But also,

1:25

it is tough out there,

1:27

and if it feels that way, it

1:30

kind of just is that way. Hello,

1:33

and welcome to Planet Money. I'm Waylon Wong.

1:35

And I'm Adrian Ma. Today on the show,

1:38

one of the toughest puzzles of this weird economic

1:40

moment we're in, how consumers

1:42

are doing, and a few theories on

1:44

why feelings are just not matching up

1:46

with data. Then we look at

1:48

grocery prices in particular and an effort

1:51

right now to combat unfair pricing using

1:53

a mostly forgotten 1930s law. It's

1:57

two of our favorite stories from our daily show,

1:59

The Indicator. after this. This

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at searchpowered.elastic.co. Today

3:03

we're looking at three signs that

3:06

show where consumers may be struggling

3:08

after years of high inflation plus

3:10

the end of pandemic-era federal support.

3:13

And before we get to those three

3:15

signs, it might be helpful to remember

3:17

how big a financial cushion we got

3:19

in those early pandemic years. Economist Peter

3:21

Gennong is a professor at the

3:23

University of Chicago. He studies how

3:25

households are doing economically. And

3:27

he says the median household saw its bank account

3:29

balance go up by a whopping 50 to 60%

3:34

at the start of the pandemic. There was

3:36

a really big increase in people's bank

3:38

account balances, both because income went up

3:40

and because they pulled back on spending.

3:43

The next three years has basically been

3:45

gradually working through that backlog and gradually

3:47

returning to normal. In other words, people

3:49

are spending down those fattened bank account

3:52

balances. At the same time, the

3:54

last couple years of high inflation have eroded their

3:56

purchasing power so that money isn't going as far.

4:00

says the increase in people's real

4:02

income is slowing down. That's income

4:04

with inflation taken into account. It sort

4:06

of seems just by accounting

4:08

that as income growth slows down, one

4:11

of two things has to happen. Either spending growth has

4:13

to slow down or we will

4:15

see people draw down their savings and

4:17

increase their borrowing in various ways. And

4:20

credit card balances, in fact, have been

4:22

climbing and climbing. The New

4:24

York Fed tracks household debt. And it found

4:26

in the fourth quarter of 2023, credit card balances hit a

4:30

record $1.1 trillion. Now,

4:33

Peter says rising credit card balances

4:35

aren't necessarily a bad sign. They

4:37

could point to optimism, you know,

4:39

people spending more because they're expecting

4:41

their income to go up. Yeah,

4:43

but it is a worrying sign if people

4:45

can't pay off their credit cards. And that

4:47

brings up our first area where consumers are

4:50

feeling the pinch, credit card

4:52

delinquency rates. The New York Fed

4:54

says that in the fourth quarter of 2023, more than 6% of credit card

4:59

balances fell into what's called serious

5:01

delinquency. That means they're at least

5:03

90 days behind. Delinquency

5:06

rates for credit cards are back on the

5:08

rise after falling during the early part of

5:10

the pandemic. As measured by credit

5:12

cards, people's health got a lot better in terms

5:14

of fewer people being behind on their credit card

5:16

payments. And now the share that are behind in

5:19

the credit card payments is going back up and

5:21

it's actually higher now than it was pre-pandemic. And

5:23

so, yeah, that does seem like a piece of

5:25

bad news to me. The Federal Reserve's

5:27

interest rate hikes in 2022 and 2023 led to higher interest

5:30

rates across

5:32

the economy for everything from mortgages to

5:34

auto loans. And for credit cards, the

5:37

typical rate went from around 15% at

5:39

the start of the pandemic to just

5:41

over 21%. I mean,

5:44

that is a 42% increase

5:46

in credit card rates. It's a huge jump.

5:48

And that's made it even harder for people

5:50

with delinquent accounts to catch up. Researchers

5:53

at the New York Fed said their data

5:55

on credit card delinquencies is a signal of

5:57

increased financial distress, especially for younger

6:00

And lower income households. And it's

6:02

among lower income households where we

6:04

find our second sign. That consumers

6:06

are feeling the pinch. That sign

6:08

is falling sales at family dollar.

6:11

Family. Dollars Parent company recently released it's

6:13

quarterly earnings report. Those. Are the

6:16

yeah official numbers that publicly traded

6:18

companies report to shareholders and securities

6:20

regulators? And the company said that same

6:22

store sales fell one percent in the latest.

6:24

Quarter from a year earlier and that

6:26

seem report it means a culprit. A.

6:29

Reduction in snap Benefits formerly

6:31

known. As food stamps during the

6:33

pandemic, snap recipients got a temporary boost

6:36

and benefits this extra money stopped. And

6:38

Twenty twenty three though. According

6:40

to one estimate, households in some states

6:42

lost nearly a hundred dollars a month

6:44

in food benefits. Others last upwards of

6:47

two hundred fifty dollars a month. Karen

6:49

Gardner is a senior Policy. Says the

6:51

At at the Center for Science

6:53

and the Public Interest. it's a

6:56

consumer advocacy organization focused unhealthy food

6:58

sucks who already have limited incomes.

7:01

And the need access to healthy said. Line

7:03

cause. It's and even tighter.

7:07

Than admitting really hard for says about what

7:09

to feed their families. Turn. On

7:11

a Twenty Twenty Two survey of snap

7:13

recipients and low income consumers who live

7:15

near dollar stores, most the people who

7:17

participated said they shot at least once

7:20

a month at Dollar General, Dollar Tree,

7:22

or Family Dollar. and the survey showed

7:24

also that most these shoppers were buying

7:26

food at dollar stores to stretch their

7:28

budgets to the end of a month

7:30

or when snap benefits are running low.

7:32

But now the options. Might be limited.

7:34

Family Dollar has announced it's closing

7:36

six hundred stores this year. It's

7:38

parent company owns Dollar Tree as

7:40

well and another four hundred Family

7:42

Dollar and Dollar Tree stores. Will

7:44

be starting over the next few years

7:47

as their leases expire at one thousand

7:49

stores that are going away and that

7:51

could put further pressure on shop is

7:53

that don't have other options for food.

7:55

Syrian says a click mean traveling further

7:58

to stop or needing to use. The

8:00

banks in. Some rural communities

8:02

as a dentist or is

8:04

it so only. Closer. For

8:06

a while. I've been wondering a lot

8:08

about where this offseason be and hoping that

8:11

will learn more sin. So. To

8:13

recap, so far, we've talked about

8:15

credit card delinquencies and dollar store

8:17

sales. To science, consumers are

8:19

feeling economic pressure as pandemic savings

8:21

run low or third and last indicator

8:23

has to do with a specific kind

8:25

of savings retirement savings. And this maybe

8:28

not as clear cut as the others

8:30

we've talked about, but. It definitely

8:32

caught our eye. longer. recently reported

8:35

that three. Point Six percent of

8:37

it's customers with retirement plans initiated

8:39

a hardship withdrawal and Twenty Twenty

8:41

three that means a acid take

8:43

money out of the retirement accounts

8:46

to cover and immediate need like

8:48

a medical expense or to prevent

8:50

as it's and or foreclosure. It's

8:53

worth pointing out this three point six

8:55

figure is a record. It's up from

8:57

two point eight percent in Twenty Twenty

8:59

Two, And Vanguard says be increasing rate

9:02

of hardship withdrawals could signal financial stress,

9:04

but. Here's. Where it gets a little

9:06

a complicated. Economists Peter going on says

9:08

there's been some important changes to for

9:11

link he plans and the last several

9:13

years more employers are now automatically and

9:15

rolling their workers and four. One K

9:17

plans. That means lower income workers

9:19

now have this new kind of

9:21

financial cushion. It's supposed to be

9:23

used for retirement, of course, but

9:25

it can also be tapped for

9:27

unexpected crunch times. Meanwhile, Congress has

9:30

made requesting hardship withdrawals easier for

9:32

customers. So when it comes to

9:34

these, increase hardship withdraws. Peter says

9:36

more data is mean it's know how

9:38

worried. We should really be. It makes it harder

9:40

to interpret this as like an indication of stress on

9:42

was your top Frawley sort of his to some changes

9:44

that are going on the background. So.

9:47

we covered credit card delinquencies dollar

9:49

store sales and hardship withdrawals from

9:51

retirement accounts all these add up

9:53

to a bigger picture of how

9:55

some consumers are feeling the pinch

9:57

right now especially those people at

9:59

the After

10:02

the break, the big emotional elephant

10:04

in the room when it comes

10:06

to bad vibes about the economy,

10:08

inflation at the grocery store, and

10:11

a Biden administration plan to pull a

10:14

1930s-era antitrust law out of retirement

10:16

to fight unfair pricing. We'll

10:18

ask, is this actually good for consumers?

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12:30

The largest grocery retailer in the

12:32

Us is Walmart now. Or to

12:34

several industry estimates, Wal Marts market

12:37

shares around twenty five percent. But

12:39

back. In the nineteen thirties, decades

12:42

before Walmart was even founded, another

12:44

grocery chain dominated the industry. Called.

12:47

The Great Atlantic and Pacific P

12:49

Company or just A in Pete.

12:51

Timothy. Richards is an economist at

12:54

Arizona State University. He said he's

12:56

agriculture and food, and he says

12:58

M C was basically the Walmart

13:00

of the nineteen thirties. And t

13:02

at the time was going through a

13:04

coast to coast and there was a

13:06

fear that it was destroying little mom

13:08

and pop businesses. Yeah. Large companies

13:11

like a P could leverage their size

13:13

to get more favorable pricing from their

13:15

groceries suppliers. They could then charged lower

13:17

prices than the mom and pop grocery

13:20

stores and this was putting small businesses

13:22

in jeopardy during the Great Depression. And

13:24

so in Nineteen Thirty six, Congress

13:26

passed the Robinson Pacman Act. It

13:29

was an anti trust laws focused

13:31

on combating price discrimination at the

13:33

wholesale level. Princess given a sin

13:35

is when a seller charges different

13:37

pricing for the same good or

13:39

service. For the past Robinson

13:41

Pubmed act essentially to prevent suppliers

13:43

from the charging different prices to

13:46

N P were other big retailers

13:48

than they do to small businesses.

13:50

So the wrong suburbanites basically says

13:53

that you have to charge the

13:55

same price for goods of light

13:57

kind and quality and Robinson. That

14:00

wasn't just for groceries. Over years

14:02

has been used in court cases

14:05

involving products like cigarettes and trucks.

14:07

The Federal Trade. Commission brought hundreds

14:09

of pieces under the law and the

14:11

nineteen sixties, but then it fizzled out.

14:14

Timothy says one major reason why is

14:16

that there are some pretty big ways

14:18

to get around the Robinson Pacman act.

14:21

Just so, for example, suppliers are

14:23

allowed to give discounts. For somebody

14:25

pursuing a lot of a good

14:27

volume, discounts are allowed. Also.

14:30

A suppliers allowed to charge a lower price

14:32

if they can prove they're doing it to

14:34

compete with another supplier. So let's say it

14:36

could point to a competitor that selling the

14:38

same product for lower price. And. So

14:40

the law just didn't seem very

14:42

effective in practice. Then, in two

14:45

thousand and seven, a bipartisan Federal

14:47

commission recommended repealing the Robinson Pacman

14:49

Acts. The commission said that when

14:51

the law with ease, it protected

14:53

small businesses at the expense of

14:56

larger, more efficient companies and therefore

14:58

prices likely went up for consumers.

15:00

The law was it repealed, but

15:02

it was essentially selves. Such a

15:05

dead horse of a piece of

15:07

legislation. the some know trying to

15:09

revive different sections of it. that's

15:11

why. So controversial because it literally

15:13

was not being used by the

15:15

government. And yet one group trying

15:17

to resuscitate the supposedly dead horse

15:19

piece of legislation is the National

15:21

Grocers Association. It's a trade group

15:24

representing privately on supermarkets. Ready.

15:26

Arsenault is a member of that

15:28

trade group and also Ceo of

15:30

Affiliated Foods, which is a grocery

15:32

wholesaler based in Texas. He distributes

15:34

groceries to hundreds of independent retailers

15:36

in eight states the last twenty

15:38

five years, and has continually progressively

15:40

get worse as warm got bigger

15:42

and a Cruisers of the World

15:44

got bigger. The. In

15:47

ability for us to be competitive or

15:49

costs has gotten worse. Ran his. company

15:51

is a middleman and the grocery

15:53

supply chain advise you know truckloads

15:56

of breakfast cereal and cake mix

15:58

for manufacturers senate mark items

16:00

and sells them to grocery stores. The

16:02

stores in turn mark up the breakfast

16:04

cereal and cake mix a little more

16:06

and sell them to shoppers. But

16:09

Walmart and other large chains don't have to

16:11

buy their breakfast cereal and their cake mix

16:13

from wholesalers, like Randy's company. They

16:15

can negotiate directly with manufacturers. And

16:18

Randy says the problem is the prices

16:20

he pays at wholesale are higher than

16:22

what Walmart charges their customers. Big

16:25

Betty Crocker cake mix, for example, right? Our

16:27

cost is $1.65 wholesale. Walmart's at $1.38

16:32

on the shelf. So

16:34

we're higher before we even touch

16:37

the box. You know,

16:39

it's basically put me in a fight with one

16:41

hand behind my back and expecting me to win

16:43

the battle. It's almost impossible. Of

16:45

course, the reason Walmart's able to get

16:47

such low prices from manufacturers is because

16:49

it's so big and buys so much.

16:52

But smaller grocers, say the Walmarts of

16:54

the world, you know, they're getting

16:57

too big of a discount. We can

16:59

buy in the same quantity, which is typically a

17:01

truckload. Ted Ballastriere is the

17:03

third generation owner of Sendex food market

17:05

in Wisconsin. He operates 18

17:08

stores in the Milwaukee area, and

17:10

he buys products through a wholesaler

17:12

that's cooperatively owned by the grocery

17:14

stores themselves. Ted says that

17:16

by pooling their purchasing power, he and

17:18

his fellow grocers can match the buying

17:20

muscle of a mega retailer. There's

17:22

no difference between a manufacturer

17:25

sending a truckload to a national

17:27

chain versus our co-op

17:29

warehouse. Ted is also part

17:32

of the National Grocers Association, and

17:34

the trade group may find a

17:36

sympathetic ear at the FTC. Chair

17:38

Lena Kahn said in 2022 that

17:40

the agency is taking a fresh

17:42

look at Robinson Patman. But

17:45

whether reviving the law would result

17:47

in lower grocery prices for a

17:49

wholesaler like Randy Arsenault and

17:52

therefore lower prices on store shelves, that

17:54

is where things get a little complicated.

18:00

That can force is it

18:02

that your prices would get

18:04

lower? Or would it be

18:06

that at Walmart those prices

18:08

would get hired. Wow things we

18:10

converge in the middle somewhere because

18:12

the. Manufacturers. Have to

18:15

make money the a game is

18:17

the opportunity to be the same

18:19

and so are cause we go

18:21

down and walmart cause. You.

18:23

Know would go up. Saw an insult

18:25

like when you think about all the people. Who.

18:27

Shop at a Walmart or a Kroger.

18:30

They could be paying more for groceries.

18:32

Potentially yeah, and prices at a

18:34

neighborhood grocery store could go down

18:37

with still higher prices. Of the

18:39

places where most of our grocery

18:41

dollars go is a very tough

18:44

sell. The calmest Timothy Richard,

18:46

says the debate over the Robison

18:48

Pacman act kind piss fairness against

18:51

efficiency. Like it might

18:53

appeal Spare that a mega retailer

18:55

can get preferential treatment from suppliers.

18:57

But. It is sufficient. And a

18:59

basic philosophy of American Anti Trust Law

19:01

Timothy says is protecting competition and efficiency.

19:04

As soon as we get into questions

19:06

a furnace us a political decision right

19:08

the you know and of politicians want

19:10

to start in a rewriting anti Trust

19:12

laws to be fair. That's

19:15

another telesis. Fundamentally, what the what? the

19:17

way that anti trust laws are are

19:19

designed. Know it's always what's best in

19:22

the minds of the consumer base. And

19:24

that is variety that is assortment that

19:26

is cheap prices. The everything else is.

19:29

Nuance about that Consumers want low prices

19:31

for stop. That speaking a

19:33

politics. A couple weeks ago, systems

19:36

democratic lawmakers and one independent who

19:38

caucuses offense sent a letter. To

19:40

the S P C asking me. Agency to

19:42

revive the Robinson Pacman Act.

19:45

So cheaper cheese crackers in

19:47

a possible future. Well my depending

19:49

where you buy and. Be

19:54

Stories and planet many sorts daily podcast

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The Indicator were originally produced by. Cooper.

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specific objectives like travel. Get Rosetta

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Stone's lifetime membership for 50% off

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and unlimited access to 25 language

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courses. Learn more at rosettaestone.pem.npr. It's

21:04

a high-stakes election year. It's not enough to

21:07

just follow along. You need to understand what's

21:09

happening so you are fully informed in

21:12

November. Every weekday on the end

21:14

of our politics podcast, our political

21:16

reporters break down important stories and

21:18

backstories from the campaign trail. But

21:20

you understand why it matters

21:22

to you. Listen to the NPR politics

21:25

podcast wherever you get your podcasts.