NoBull Inflation/Deflation Watch

Nov 20, 2023 | Macro Insights, No Bull Economics

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Government data shows steady price pressure relief, particularly as evidenced by its PPI (wholesale) number which has been running negative since March 2023. This is consistent with 3Q reports from numerous consumer-facing companies, many of which benefit from margin-boosting commodity cost deflation. Time for a rate cut to help lower-income consumers! 

PPI & CPI Y/Y% Change Graph

Management Comments About Price Levels During the Most Recent Quarter

Performance Food Group-2.3% deflation during fiscal 1QFY24 is expected to extend as mild deflation next quarter, moving towards flat at the beginning of fiscal 3Q24 & finishing the year at a healthy low-single-digit inflation rate.
Carrols Restaurant Group (Burger King)Commodity inflation declined to +0.7% during the quarter despite a +4.8% increase in beef prices to $2.84 per pound. Commodity inflation is expected to increase by low single digits during 4Q.
Brinker InternationalCommodity basket deflation is expected next quarter, increasing to a lower single-digit inflationary environment during the second half of its fiscal year.
Dine BrandsCommodity inflation guidance for 4Q: flat to down low single digits.
Denny’sCommodity inflation improved from +1% during 2Q23 to -1% this quarter. Commodity inflation for the full year 2023 is expected at between +1% to +2%.
CostcoLast quarter’s +3% to +4% inflation level declined to +1% to +2% this quarter. Deflation in eggs & some dairy products during the quarter was offset by inflationary trends in gasoline & beef.
United Natural FoodsThe company exited fiscal 4Q23 with just under +6% inflation (+9% during full-year FY23), a rate which is expected to decelerate to +2% to +3% during FY24.
General MillsFY24 focus is on the evolving external environment highlighted by: moderating inflation; stabilizing supply chains; and a resilient, but increasingly cautious consumer.
AmazonRetail prices benefit from lower inflation with a decline in line haul, ocean, & rail shipping rates partially offset by higher fuel prices.
O’Reilly AutomotiveGuidance calls for a normalized inflation environment (up +LSD) in 4Q23.
AutoZoneInflation was up low single-digits during the quarter & should be in the same range during fiscal 1Q24 as the industry migrates back to pre-covid inflation levels (low to mid-single-digit range).

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