(NewsNation) — Walmart’s U.S. CEO John Furner says persistent inflation, particularly around grocery prices, explains the disconnect between consumer sentiment and economic data.
“The nagging problem is stubborn inflation,” Furner said during Wednesday’s National Retail Federation annual sales forecast event. “Food inflation over the last few years has been high.”
The rise in consumer prices has forced a lot of shoppers into difficult choices about what they buy, said Furner, who also serves as the NRF’s board chair.
On a positive note, Furner said “supply chains are in much better shape” than in recent years when pandemic bottlenecks constrained supply as consumer demand surged. The supply-side improvements have helped moderate inflation over the past year, but it’s remained sticky.
Last month, annual inflation ticked up to 3.2% — a sign the battle against rising prices isn’t over. Although food inflation has slowed considerably over the past year, grocery prices have continued to rise.
Today, Americans are paying over 25% more for groceries than in 2019 and those prices have risen faster than overall inflation. Some items, including eggs and milk, cost less now than they did at inflation’s peak but a widespread drop-off in prices is both unlikely and undesirable.
On Wednesday, Federal Reserve officials voted to keep interest rates at a 22-year high due to elevated inflation, which is above the Fed’s 2% target rate.
Explaining the decision at a news conference, Fed Chair Jerome Powell signaled that rate cuts are expected “at some point this year” but said the path forward is “uncertain.”
Meanwhile, other economic indicators have defied expectations. The U.S. economy added a surprising 275,000 jobs last month on top of 229,000 jobs added in January. The unemployment rate ticked up to 3.9% in February but is still near historic lows. Workers wages have also grown faster than inflation for much of the past year.
So far, inflation has eased without the worst recession fears coming to pass. Yet, consumers remain less optimistic about the economy than what would typically be expected given the current data.
Former U.S. Treasury Secretary Larry Summers has argued that popular economic metrics such as the Consumer Price Index don’t properly account for the way higher interest rates have impacted Americans.
“Consumers are including the cost of money in their perspective on their economic well-being, while economists are not,” Summers and other top economists wrote in a working paper last month.
NRF, the nation’s largest retail trade group, said Wednesday that it expects U.S. retail sales to increase 2.5% to 3.5% this year, down slightly from the 3.6% annual sales growth in 2023.
