Walmart CEO Doug McMillon predicted on Tuesday that wage inflation will be “with us basically forever” and detailed how higher price levels are impacting the grocery giant.
The Consumer Price Index (CPI) rose 8.5% year-over-year as of July, according to a report released last week by the Bureau of Labor Statistics. In an interview with CNBC anchor Courtney Reagan, McMillon explained that Walmart is gaining more consumers as wealthier families struggle to contend with inflation.
“It’s a conflicting period in terms of the data. If you look at what’s happening across categories and across income levels, inflation is having an impact particularly for those who don’t have as much money,” McMillon said. “So we see them behaving in different ways … Higher income families are shopping at Walmart because they’re so price sensitive right now. We shared earlier this morning that families making more than $100,000 in household income have driven a lot of our growth during this last quarter.”
Although year-over-year inflation saw a modest decline from 9.1% to 8.5% as gas prices fell between June and July, food prices continued to accelerate. Food at home — a category that includes groceries — rose 1.3% month-over-month and 13.1% year-over-year.
“Right around the middle of the first quarter is when we saw food inflation reach a level where behavior started to change,” McMillon added. “It got to a level where people making less than $50,000 household income started behaving differently, and then to the $75,000 level and then to the $100,000 level.”
Likewise, McMillon — whose company boasts 1.6 million domestic employees and remains the largest private employer in the United States — said that wage inflation will endure indefinitely.
“We’ve raised our wages, which we’re happy to do … that creates a new level of which pricing has to be adjusted to reflect,” he commented. “So I think there’s some level of inflation that’s going to be with us basically forever. Hopefully we’ll see food inflation in particular improve as we go through next year.”
Although employees are taking home nominally larger paychecks, real average hourly wages dropped 3% during the same period, according to the Bureau of Labor Statistics — meaning that Americans must tighten their budgets or work more than last year to enjoy the same standard of living.
One recent analysis from Republican members of the Joint Committee on Taxation determined that inflation cost the American household $717 in July 2022 alone, adding that inflation will cost Americans $8,607 from August 2022 through July 2023 even if prices stop increasing altogether. “Americans are facing the highest inflation rates in decades, making it harder for them to afford everyday goods and more expensive to raise their families,” the analysis said.
President Joe Biden and other White House officials nevertheless spun the latest price level news by noting that inflation was, on paper, 0% last month — with scant mention of continually rising prices for food and other commodities, as well as the fact that inflation was 1.4% when Biden assumed office.
On Tuesday, Biden is slated to sign the $740 billion Inflation Reduction Act, which contains $369 billion for climate change initiatives alone. A slim 12% of Americans believe that the law will actually decrease inflation, according to a recent YouGov poll.