Grocery prices, credit card debit, and your 401K (Two Indicators)

This episode of Planet Money explores the economic pressures on consumers, including rising grocery prices, increasing credit card debt, and trends in 401K withdrawals.

1. Grocery prices have significantly outpaced general inflation, affecting consumers' purchasing power.
2. Credit card debt has reached an all-time high, with delinquency rates also on the rise, indicating increased financial stress among consumers.
3. The use of 401K hardship withdrawals has grown, suggesting that more people are struggling to meet immediate financial needs.
4. Historical antitrust laws like the Robinson Patman Act are being reconsidered as tools to combat current unfair pricing practices in the grocery sector.
5. Legislative efforts and discussions are ongoing about how to balance consumer protection with business efficiency and market competitiveness.

1: Economic Overview

A discussion on the rising grocery prices and their impact on consumers, with a specific focus on inflation's role. Waylon Wong: "Grocery prices have gone up 25% since January 2020." Adriene Ma: "If it feels tough out there, it kind of just is that way."

2: Credit Card Debt

Exploration of the rising credit card debt and its implications for financial health across demographics. Adriene Ma: "Credit card balances hit a record $1.1 trillion." Peter Ganong: "The share that are behind in their credit card payments is going back up."

3: 401K Hardship Withdrawals

An analysis of the increase in 401K hardship withdrawals as an indicator of financial distress. Waylon Wong: "3.6% of customers initiated a hardship withdrawal in 2023, a record."

4: Antitrust Discussion

Discussion on the use of the Robinson Patman Act to address unfair pricing practices in the grocery industry. Adriene Ma: "A bipartisan federal commission recommended repealing the Robinson Patman act in 2007."

1. Review and adjust budgets to reflect current economic realities.
2. Consider consolidating and refinancing high-interest debt to manage repayments more effectively.
3. Increase financial literacy to better understand and manage personal finance and investments.
4. Explore eligibility for financial relief programs to aid in managing essential expenses.
5. Regularly review and adjust retirement savings plans to ensure long-term financial security.

What's going on with consumers? This is one of the trickiest puzzles of this weird economic moment we're in. We've covered a version of this before under the term "vibecession," but it's safe to say, the struggle is in fact real. It is not just in our heads. Sure, sure, some data is looking great. But not all of it.

What's interesting, is exactly why the bad feels so much worse than the good feels good. Today on the show, we look into a few theories on why feelings are just not matching up with data. We'll break down some numbers and how to think about them. Then we look at grocery prices in particular, and an effort to combat unfair pricing using a mostly forgotten 1930's law. Will it actually help?

Today's episode is adapted from episodes for Planet Money's daily show, The Indicator. Subscribe here.

Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.

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People

Waylon Wong, Adriene Ma, Peter Ganong

Companies

Walmart, Kroger, Family Dollar, Dollar Tree

Content Warnings:

None

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Waylon Wong
This is Planet Money from NPR.

Adriene, I don't know how often you frequent your local supermarket, but grocery prices are not okay right now. It's like over six, $6 for a family sized box of Cheez its, which, you know, that's my personal barometer for inflation. Oh, my gosh. That is a barometer of inflation that I understand. Truthfully.

Adriene Ma
I'm a cheese nips person more than. A cheese its person. Yeah. I think they taste less healthy. Yeah.

Waylon Wong
Though that's important. The struggle is real, though. Grocery prices have gone up 25% since January 2020, and that's outpaced the increase in inflation overall. And grocery prices hold a kind of special place in our economics brains. We feel the pain of inflation every single time we pay those new higher prices week in, week out, and pretty much everyone shops.

Adriene Ma
Yeah. And just like contrast that with some of the positive data points right now, like rising wages. If you get a cost of living pay adjustment, maybe it feels great when you first hear about it, but then it gets direct deposited in your bank account and you kind of stop feeling it week in and week out. But also, it is tough out there. And if it feels that way, it kind of just is that way.

Waylon Wong
Hello, and welcome to Planet Money. I'm Waylon Wong. And I'm Adriene Ma. Today on the show, one of the toughest puzzles of this weird economic moment we're in, how consumers are doing and a few theories on why feelings are just not matching up with data. Then we look at grocery prices in particular and an effort right now to combat unfair pricing using a mostly forgotten 1930s law.

It's two of our favorite stories from our daily show, the Indicator, after this.

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Adriene Ma
So download the Redfin app to get started today. Today we're looking at three signs that show where consumers may be struggling after years of high inflation, plus the end of pandemic era federal support. And before we get to those three signs, it might be helpful to remember how big a financial cushion we got in those early pandemic years. Economist Peter Ganong is a professor at the University of Chicago. He studies how households are doing economically, and he says the median household saw its bank account balance go up by a whopping 50% to 60%.

Waylon Wong
At the start of the pandemic, there. Was a really big increase in people's bank account balances, both because income went up and because they pulled back on spending. The next three years has basically been gradually working through that backlog and gradually returning to normal. In other words, people are spending down those fattened bank account balances. At the same time, the last couple of years of high inflation have eroded their purchasing power, so that money isn't going as far.

And Peter says the increase in people's real income is slowing down. That's income with inflation taken into account. It sort of seems, just by accounting, that as income growth slows down, one of two things has to happen. Either spending growth has to slow down, or we will see people draw down their savings and increase their borrowing in various ways. And credit card balances, in fact, have been climbing and climbing.

Adriene Ma
The New York Fed tracks household debt, and it found in the fourth quarter of 2023, credit card balances hit a record $1.1 trillion. Now, Peters says rising credit card balances aren't necessarily a bad sign. They could point to optimism, you know, people spending more because they're expecting their income to go up. Yeah, but it is a worrying sign if people can't pay off their credit cards. And that brings up our first area where consumers are feeling the pinch.

Credit card delinquency rates. The New York Fed says that in the fourth quarter of 2023, more than 6% of credit card balances fell into what's called serious delinquency. That means they're at least 90 days behind. Delinquency rates for credit cards are back on the rise after falling during the early part of the pandemic, as measured. By credit cards, people's health got a lot better in terms of fewer people being behind on their credit card payments.

Peter Ganong
And now the share that are behind in their credit card payments is going back up and it's actually higher now than it was pre pandemic. And so, yeah, that does seem like a piece of bad news to me. The Federal Reserve's interest rate hikes in 2022 and 2023 led to higher interest rates across the economy for everything from mortgages to auto loans. And for credit cards. The typical rate went from around 15% at the start of the pandemic to just over 21%.

Waylon Wong
I mean, that is a 42% increase in credit card rates. It's a huge jump, and that's made it even harder for people with delinquent accounts to catch up. Researchers at the New York Fed said their data on credit card delinquencies is a signal of increased financial distress, especially for younger and lower income households. And it's among lower income households where we find our second sign that consumers are feeling the pinch. That sign is falling sales at family dollar.

Adriene Ma
Family dollar's parent company recently released its quarterly earnings report. Those are the official numbers that publicly traded companies report to shareholders and securities regulators. And the company said that same store sales fell 1% in the latest quarter from a year earlier. In that same report, it named a culprit a reduction in Snap benefits, formerly known as food stamps. During the pandemic, SnaP recipients got a temporary boost in benefits.

This extra money stopped in 2023, though. According to one estimate, households in some states lost nearly $100 a month in food benefits. Others lost upwards of $250 a month. Karen Gardner is a senior policy associate at the center for Science and the Public Interest. It's a consumer advocacy organization focused on.

Karen Gardner
Healthy food folks who already have limited incomes and limited access to healthy food. When budgets are even tighter, they are making really hard choices about what to feed their families. Karen worked on a 2022 survey of SNAP recipients and low income consumers who live near dollar stores. Most of the people who participated said they shopped at least once a month at Dollar General, dollar tree or family dollar. And this survey showed also that most of these shoppers were buying food at dollar stores to stretch their budgets at the end of the month or when SnaP benefits were running low.

Waylon Wong
But now their options might be limited. Family Dollar has announced it's closing 600 stores this year. Its parent company owns Dollar Tree as well, and another 400 family dollar and dollar tree stores will be shutting over the next few years as their leases expire. That's 1000 stores that are going away and that could put further pressure on shoppers that don't have other options for food. Karen says it could mean traveling further to shop or needing to use food banks.

Karen Gardner
In some rural communities, the dollar store is the closest and only grocer for a while, I've been wondering a lot about where those dollar stores will be and hoping that we'll learn more soon. So to recap, so far we've talked about credit card delinquencies and dollar store sales, two signs consumers are feeling economic pressure as pandemic savings run low. Our third and last indicator has to do with a specific kind of savings, retirement savings. And this sign is maybe not as clear cut as the others we've talked about, but it definitely caught our eye. Vanguard recently reported that 3.6% of its customers with retirement plans initiated a hardship withdrawal in 2023.

Waylon Wong
That means they asked to take money out of their retirement accounts to cover an immediate need like a medical expense or to prevent eviction or foreclosure. And it's worth pointing out this 3.6 figure is a record. It's up from 2.8% in 2022. And Vanguard says the increasing rate of hardship withdrawals could signal financial stress. But here's where it gets a little complicated.

Economist Peter Gannong says there's been some important changes to 401k plans in the last several years. More employers are now automatically enrolling their workers in 401k plans. That means lower income workers now have this new kind of financial cushion. It's supposed to be used for retirement, of course, but it can also be tapped for unexpected crunch times. Meanwhile, Congress has made requesting hardship withdrawals easier for customers.

So when it comes to these increased hardship withdrawals, Peters says more data is needed to know how worried we should really be. It makes it harder to interpret this as like an indication of stress unless you account for all these sort of institutional changes that are going on in the background. So weve covered credit card delinquencies, dollar store sales and hardship withdrawals from retirement accounts. All these add up to a bigger picture of how some consumers are feeling the pinch right now, especially those people. At the margins after the break.

The big emotional elephant in the room when it comes to bad vibes about the economy, inflation at the grocery store, and a Biden administration plan to pull pull a 1930s era antitrust law out of retirement to fight unfair pricing. We'll ask, is this actually good for consumers?

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Adriene Ma
Sometimes it feels like there aren't enough hours in the workday, especially if you're trying to grow your business. Thats why you and your team need Slack. Its the AI powered platform where work happens and it has so many helpful features like huddles for impromptu meetings and workflow builder to automate tasks. Slack is what you need to help everyone have a productive, easy day. Slack grow your business here.

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Waylon Wong
Maybe it's time to rethink the resume. So traditionally you would say like stand out, have like two beautiful columns and colors, make it visually appealing, like do none of that anymore. What works when humans review a resume may not work as well when AI tools are involved. In our latest bonus episode, a conversation with Hilke Shalman, author of a new book on the promise and perils of AI and hiring, you can check that out now if you're a planet money plus listener. If that's you, thanks.

If that's not you, it could be you. Get bonus content, sponsor free listening, and support our work. Just go to plus dot npr.org dot. The largest grocery retailer in the US is Walmart. Now, according to several industry estimates, Walmart's market share is around 25%.

Adriene Ma
But back in the 1930s, decades before Walmart was even founded, another grocery chain dominated the industry, called the Great Atlantic and Pacific Tea Company. Or just A and P. Timothy Richards. Is an economist at Arizona State University. He studies agriculture and food, and he says a and P was basically the Walmart of the 1930s.

Peter Ganong
A and P at the time was going coast to coast, and there was a fear that it was destroying these little mom and pop businesses. Yeah, large companies like AMP could leverage their size to get more favorable pricing from their grocery suppliers. They could then charge lower prices than the mom and pop grocery stores. And this was putting small businesses in jeopardy during the Great Depression. And so in 1936, Congress passed the Robinson Patman act.

Waylon Wong
It was an antitrust law focused on combating price discrimination at the wholesale level. Price discrimination is when a seller charges different pricing for the same good or service. So they pass a RobINson PatMAN act, essentially to prevent suppliers from charging different prices to A and P or other big retailers than they do to small businesses. So the Robinson Patman act basically says that you have to charge the same price for goods of like kind and quality. And the Robinson Patman act wasn't just for groceries.

Adriene Ma
Over the years, it's been used in court cases involving products like cigarettes and trucks. The Federal Trade Commission brought hundreds of cases under the law in the 1960s, but then it fizzled out. Timothy says one major reason why is that there are some pretty big ways to get around the Robinson Patman act. Yeah. So, for example, suppliers are allowed to give discounts for somebody purchasing a lot of a good volume.

Discounts are allowed. Also, a supplier is allowed to charge a lower price if they can prove they're doing it to compete with another supplier. So let's say it can point to a competitor that's selling the same product for a lower price. And so the law just didn't seem very effective in practice. Then, in 2007, a bipartisan federal commission recommended repealing the Robinson Patman act.

Waylon Wong
The commission said that when the law was used, it protected small businesses at the expense of larger, more efficient companies, and therefore prices likely went up for consumers. The law wasn't repealed, but it was essentially shelved. Is such a dead horse of a piece of legislation. So now trying to revive different sections of it. That's why it's so controversial, because it literally was not being used by the government.

Adriene Ma
And yet one group trying to resuscitate this supposedly dead horse piece of legislation is the National Grocers association. It's a trade group representing privately owned supermarkets. Randy Arsenault is a member of that trade group and also CEO of Affiliated Foods, which is a grocery wholesaler based in Texas. He distributes groceries to hundreds of independent. Retailers in eight states in the last 25 years.

Randy Arsenault
It has continually, progressively got worse. As Walmart got bigger and the Krogers of the world got bigger, the inability for us to be competitive on cost has gotten worse. Randy's company is a middleman in the grocery supply chain. It buys, you know, truckloads of breakfast cereal and cake mix for manufacturers. Then it marks up those items and sells them to grocery stores.

Waylon Wong
The stores, in turn, mark up the breakfast cereal and cake mix a little more and sell them to shoppers. But Walmart and other large chains don't have to buy their breakfast cereal and their cake mix from wholesalers like Randy's company. They can negotiate directly with manufacturers. And Randy says the problem is the prices he pays at wholesale are higher than what Walmart charges their customers. Take Betty Crocker Cake mix, for example.

Randy Arsenault
Right. Our cost is $1.65 wholesale. Walmart's at $1.38 on the shelf, so we're higher before we even touch the box. You know, it's basically put me in a fight with one hand behind my back and expecting me to win the battle. It's almost impossible.

Adriene Ma
Of course, the reason Walmart's able to get such low prices from manufacturers is because it's so big and buys so much. But smaller grocers say the Walmarts of the world, you know, they're getting too big of a discount. We can buy in the same quantity, which is typically a truckload. Ted Balesteri is the third generation owner of Sendix Food Market in Wisconsin. He operates 18 stores in the Milwaukee area, and he buys products through a wholesaler that's cooperatively owned by the grocery stores themselves.

Waylon Wong
Ted says that by pooling their purchasing power, he and his fellow grocers can match the buying muscle of a mega retailer. There's no difference between a manufacturer sending a truckload to a national chain versus our co op warehouse. Ted is also part of the National Grocers association, and the trade group may find a sympathetic ear at the FTC chair. Lena Khan said in 2022 that the agency is taking a fresh look at Robinson Patman. But whether reviving the law would result in lower grocery prices for a wholesaler like Randy Arsenault, and therefore lower prices on store shelves, that is where things get a little complicated.

In an ideal world where the Robinson Patman act gets enforced, is it that your prices would get lower, or would it be that at Walmart, those prices would get higher? Well, I think that we converge in the middle somewhere, because the manufacturer does have to make money. The end game is the opportunity to be the same. And so our costs would go down and Walmart's cost, you know, would go up. Huh.

Adriene Ma
I mean, so, like, when you think about all the people who shop at a Walmart or a kroger, they could be paying more for groceries, potentially. Yeah. And prices at a neighborhood grocery store could go down. But still higher prices at the places where most of our grocery dollars go is a very tough sell. Economist Timothy Richards says the debate over the Robinson Patman act kind of pits fairness against efficiency.

Like it might not feel fair that a mega retailer can get preferential treatment from suppliers, but it is efficient. And the basic philosophy of american antitrust law, Timothy says, is protecting competition and efficiency. As soon as we get into questions of fairness, that's a political decision, right? And if politicians want to start rewriting antitrust laws to be fair, that's another kettle of fish, fundamentally, the way that antitrust laws are designed. You know, it's always what's best in the mind of the consumer, right?

Peter Ganong
And that is variety. That is assortment, that is cheap prices. Everything else is nuance above that. Consumers want low prices, full stop. But speaking of politics, a couple weeks ago, 15 democratic lawmakers and one independent who caucuses with them sent a letter to the FTC asking the agency to revive the Robinson Patman act.

Adriene Ma
So cheaper cheese crackers in a possible future? Well, it might depend on where you buy them.

Waylon Wong
These stories from Planet Money's short daily podcast, the Indicator, were originally produced by Cooper Katz McKim. They were engineered by co. Takasugi Chernivin and Nisha Hyness. They were fact checked by Sierra Juarez. Kake and Kenan edits the indicator.

I'm Waylon Wong. And I'm Adrian Ma. This is NPR. Thanks for listening.

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Adriene Ma
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