Walmart CEO Says Deflation Could Be Coming This Holiday Season

By Jessel Renolayan

Nov 18, 2023 04:30 AM EST

Walmart CEO Doug McMillon said on Thursday that the possibility of deflation could be coming this holiday season as other general merchandise and essential grocery gets more affordable.

This forecasted shift could bring relief to consumers preparing for festive celebrations, offering the prospect of more budget-friendly options in the coming weeks. 

According to CNBC, McMillon hinted at a potential shift in pricing dynamics by saying: "We may see dry grocery and consumables start to deflate in the coming weeks and months." 

On the company's Thursday earnings call, Walmart CEO Doug McMillon said: "In the U.S., we may be managing through a period of deflation in the months to come... And while that would put more unit pressure on us, we welcome it, because it's better for our customers."

Walmart President & CEO Doug McMillon
(Photo : Derek White/Getty Images for Operation HOPE, Inc.)

Walmart CEO Remarks Echo Statements of Government and Other Retailers

Doug McMillon's recent remarks align with similar statements from the government and other retailers earlier this week, providing a glimmer of hope for consumers fatigued by the impact of inflation. 

These collective voices hinted at potential signs of relief for the consumers, offering a respite for those burdened by the persistent strains of rising prices.

According to the Labor Department, inflation was flat month over month, and prices on phones, appliances, toys, and airline tickets have all declined. 

This data suggests a nuanced picture of the economic landscape, where certain sectors have experienced price decreases, potentially offering some relief to consumers in those specific categories.

On Tuesday's earnings call, Home Depot CFO Richard McPhail said, "The worst of the inflationary environment is behind us." The retail giant offers a ray of hope to investors and consumers by asserting that the worst inflationary storm is behind us despite declining sales.

After years of steadily climbing prices, the traditional Thanksgiving gathering is poised to become more accessible to households nationwide as the American Farm Bureau Federation (AFBF) reported a downward trajectory in turkey prices.

READ ALSO: Airlines Offer Cheap Flights for Off-Peak Travel as JetBlue, Southwest, Spirit and Frontier Look to Fill Seats 

Deflation Could be Dangerous to the Economy

Deflation emerges as a potential boon for consumers, promising relief through lower prices, a welcome respite amid the challenges of inflation. However, this seemingly positive shift carries an underlying concern for the broader economy. 

The delicate balance between consumer benefit and economic stability becomes apparent as deflation, while offering immediate advantages to shoppers, may pose risks and challenges to the economy's overall health.

Declining prices may signal a lack of demand, and since consumer spending constitutes a significant portion of the economy, it holds substantial influence. CNN reported that stimulating economic growth becomes more challenging for central banks when an economy enters a deflationary phase instead of experiencing inflation.

Anticipating a future decrease in prices often leads individuals to postpone current purchases. When this mindset becomes widespread among the populace, it significantly reduces overall consumer spending. This decline in spending can have far-reaching implications, prompting employers to implement workforce reductions in response to diminished revenue. 

As a result, this domino effect has the potential to push an economy into a recessionary phase, highlighting the intricate relationship between consumer behavior, employment trends, and economic stability.

From 1991 to 2001, Japan infamously had a period dubbed "the lost decade," during which its economy persistently contracted amid the challenges of deflation.

Reflecting on the economic challenges faced by Japan during "the lost decade," it took subsequent decades of employing stimulative measures to reintroduce inflation, a crucial step in revitalizing and growing the economy.

READ MORE: Turkey Prices Drop, Making Thanksgiving Dinner Cheaper This Year, Says American Farm Bureau Federation

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