Want To Know About The Health Of The US Economy? Check The Laundry Room

Want To Know About The Health Of The US Economy? Check The Laundry Room
Theodora Lee Joseph, CFA

over 1 year ago1 min

Mentioned in story

US inflation has softened and the labor market still looks strong, but the consumer is beginning to show signs of strain…most notably in the laundry department.

It wasn’t too long ago – the second quarter of this year – that Procter & Gamble (PG), the market leader in laundry soap, was able to successfully hike prices on Tide and other brands without consumers batting an eye. It raised prices by 10% and volumes stayed largely flat. But after months and months of inflation – on all kinds of purchases – things look to be changing. In recent weeks, US consumers have been trading down by choosing cheaper brands of detergent.

The chart above shows how various categories of laundry soap have gained – or lost – their share of the US market, compared to the year before. Sales of premium detergent (dark blue line) have been declining since July as consumers ditch brand names and opt for cheaper private label and value detergents.

The sign that US consumers are trading down is interesting on two fronts. First, it shows that the US economy might not be as strong as the job market implies. Consumers are an essential engine of the economy, after all, and when they shift how they spend money, even on essential items like laundry detergent, that can be a warning sign. Secondly, it sets the stage for the next stage of a profit squeeze that’s headed for companies and their suppliers – especially those that sell premium ranges. It’s going to get increasingly harder to justify those price increases…

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