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Biden Tells Grocery Stores to Cut Prices as US Economy Bounces Back

Kroger retail grocery store interior. (Photo: © Billy Blume/Dreamstime.com)

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By Akerele Christabel

February 8, 2024
3:55 pm
Los Angeles, CA

GDP Beats predictions, rises by 3.3% in 2023 Economic Year The US economy seems to have experienced a resurgence, according to data from the Commerce Department’s Bureau of Economic Analysis. The economy beat predictions by growing 3.3% in the final quarter of 2023. People spending more and strong job creation fueled this positive performance. Over 2.7 million new jobs were added throughout the entire year. Reports show that consumer spending in both goods and services outperformed predictions for both November and December. For the full year, retail sales, apart from automobiles and gas, increased by 4.9%. Inflation-adjusted disposal personal income rose 4.2 % in 2023. An increase in income means Americans will be saving more, with the personal saving rate rising to 4.5 % in 2023. This data was

GDP Beats predictions, rises by 3.3% in 2023 Economic Year

The US economy seems to have experienced a resurgence, according to data from the Commerce Department’s Bureau of Economic Analysis. The economy beat predictions by growing 3.3% in the final quarter of 2023. People spending more and strong job creation fueled this positive performance.

Over 2.7 million new jobs were added throughout the entire year. Reports show that consumer spending in both goods and services outperformed predictions for both November and December. For the full year, retail sales, apart from automobiles and gas, increased by 4.9%. Inflation-adjusted disposal personal income rose 4.2 % in 2023. An increase in income means Americans will be saving more, with the personal saving rate rising to 4.5 % in 2023.

This data was analyzed from the fourth quarter of 2022 to the fourth quarter of 2023. Analytics show an increase in real GDP by 3.1% during that timeframe compared with a rise of 0.7 % from the fourth quarter of 2021 to the fourth quarter of 2022

This economic growth is attributed to President Biden’s “Bidenomics” policy. The President seeks to make smart investments in America, including investing in America’s manufacturing industry. The result of this is a boom in the manufacturing industry. Annual manufacturing construction spending made the largest contribution to GDP ever, driven by the building of houses and factories.

With the economy back on the road and the tide of inflation receding, President Biden’s administration now turns its attention to large supermarket chains. The White House is urging these companies to reduce prices on everyday items like milk, eggs, and bread.

A key member of the Biden administration, Jared Bernstein, the chair of Biden’s Council of Economic Advisers, made this known in a virtual meeting with reporters. According to him, the administration will not hesitate to turn the spotlight on establishments that insist on selling foods at inflation-price as inflation gradually winds down.

“Our message is a very clear one that the president has and will continue to lean into, which is, if you’re a company whose input prices have come down and you’re not passing those savings along to the consumer, he will call you out,” Bernstein said.

“We’ve seen elevated (profit) margins, particularly in the grocery sector, and have taken note that there needs to be more pass-through there (to consumers),” he also added.

President Biden recently denounced widespread corporate practices he deems unfair to consumers, labeling them “price gouging, junk fees, greedflation, and shrinkflation.” He has taken several actions to address these concerns, urging drug manufacturers to lower insulin costs, pressuring hotel chains to eliminate unnecessary fees, and advocating for increased competition in the meat-packing industry following pandemic-related price surges.

However, these efforts may be overshadowed by upcoming elections. Despite positive economic indicators like strong job and wage growth, voters remain anxious about rising costs, potentially impacting Biden’s approval ratings and re-election bid.

According to Reuters, huge grocery chains like Walmart, Kroger, and Albertsons are booking 20% and above gross profit margins. This is roughly in line with where they were before the COVID-19 pandemic sent inflation to the skies.

While individual experiences of higher grocery bills are widespread, a White House analysis provides concrete data. Their analysis of Census data shows that food and beverage retailers’ average profit margin has increased by 20% compared to pre-pandemic levels. This indicates that while factors like supply chain disruptions and rising fuel costs contribute to higher food prices, retailers are also capturing a larger share of the markup, potentially exacerbating the affordability issue for consumers.

The University of Michigan survey, cited by Bernstein, indicates consumer confidence climbing to its highest point since July 2021. This positive shift is attributed to easing inflation, a robust job market, and real wages outpacing price growth. However, a key concern, which is the affordability of essential goods, remains.

Bernstein emphasizes the administration’s focus on tangible cost reductions, not just lower inflation figures. Specific areas like eggs, milk, appliances, airfares, used cars, and gas are highlighted as being particularly sensitive for American consumers. While eggs may constitute a small slice of the Consumer Price Index, Bernstein acknowledges their symbolic importance within the “national psyche.”

However, concerns over potential price hikes remain, amplified by the proposed $24.6 billion merger between Kroger and Albertsons. This deal, awaiting antitrust review, raises fears of reduced competition and subsequent price increases.

President Biden’s call for lower grocery margins is echoed in the response of grocery giant Kroger. Their spokesperson claims to agree with the president, asserting that they have bucked the trend of increasing margins, unlike other grocers. They further argue that the merger would benefit consumers by generating at least half a billion dollars in additional price reductions at Albertsons stores.

However, independent grocers, represented by the National Grocers Association, have voiced concerns. They advocate for stricter antitrust enforcement, alleging that dominant retailers leverage their power to force suppliers to hike prices for smaller rivals, ultimately impacting consumer affordability.

Grocery prices have jumped by 25 % over the past four years, outpacing overall inflation of 19 % during the same period. And while prices of appliances, smartphones, and a smattering of other goods have declined, groceries got slightly more expensive last year, with particularly sharp jumps for beef, sugar, and juice, among other items.

Soaring grocery prices aren’t just a pandemic hangover. While initial disruptions set the stage, recent weather extremes (droughts impacting fruits, vegetables, and sugar) and the massive avian flu outbreak (driving up poultry and egg prices) continue to fuel the fire.