Consumers enjoyed a break from price increases during the holiday shopping season.
But now, companies have begun raising prices once more, and at higher levels than usual, the Wall Street Journal (WSJ) reported Monday (Feb. 16).
As the report points out, many companies typically increase prices at the beginning of the year. But UBS economist Alan Detmeister told the WSJ that price hikes seemed to be steeper than normal in January on appliances, electronics and other durable goods.
Some companies blame these increases on tariffs, while others—small businesses in particular—point to higher wages and health insurance costs.
Prices on the most affordable imported goods are up by 2.3% since falling at the end of November, according to data through Feb. 10 from Alberto Cavallo, a Harvard Business School professor who monitors daily online prices at major U.S. retailers.
The report also points to the Adobe Digital Price Index, which found that online prices showed their largest monthly increase in 12 years last month, fueled by higher price tags on electronics, computers, appliances, furniture and bedding.
Retail prices began to fall in October, with the largest decreases coming before Black Friday, Cavallo said. But they then started rising again, particularly after Christmas, in what appears to be a post-holiday reset, the WSJ said.
Companies are raising prices at a time when a “K-shaped economy” is emerging between high-income and middle-income households, as PYMNTS wrote last week.
Data from Bank of America shows that low- and middle-income households posted weaker year-over-year spending growth than high-income households last month, with wage growth showing a similar pattern.
“These figures help explain why overall consumer spending can hold up, even as a growing share of households feels squeezed,” PYMNTS wrote. “When spending is increasingly concentrated at the top, the economy can look resilient in aggregate while becoming fragile underneath.”
Housing is where the fragility is toughest to ignore. Bank of America’s payments data showed that “for around a quarter of lower- and middle-income households… rent swallows up more than half their yearly income,” compared to about 20% in 2019. Even when Americans trade down, there are limits, particularly for non-negotiable bills.
PYMNTS CEO Karen Webster has been tracking this shift for months. Affordability has become a nationwide conversation, not because American consumers no longer know how to budget, but because the largest line items in household budgets have been pushed higher.
“The biggest components of household budgets—housing, healthcare, insurance, utilities, transportation and debt service—have reset higher… [and] are not expenses consumers can easily comparison-shop, negotiate away or substitute out of,” Webster wrote in January.
