Consumer-focused firms are seeing no shortage of demand despite the soaring cost-of-living, prompting several to upgrade sales forecasts for the current year, though questions remain about how long that will last.
While some consumers are shielding themselves from price hikes by trading down to own label products, enough are spending more for McDonalds (MCD.N) to risk lifting the price of a cheeseburger in Britain for the first time in fourteen years on WednesdayCompanies will raise prices if and when they feel consumers are willing and able to pay them," said Nuveen's Chief Investment Strategist, Brian Nick, "It's become harder to do this in 2022 as wage growth slows and excess savings fall."
The global economy is mired in a serious slowdown, with some key economies at high risk of recession over the coming year, according to Reuters polls of hundreds of economists worldwideon February 12, 2008. REUTERS/Stephen Hird
LONDON, July 27 (Reuters) - Consumer-focused firms are seeing no shortage of demand despite the soaring cost-of-living, prompting several to upgrade sales forecasts for the current year, though questions remain about how long that will last.
While some consumers are shielding themselves from price hikes by trading down to own label products, enough are spending more for McDonalds (MCD.N) to risk lifting the price of a cheeseburger in Britain for the first time in fourteen years on Wednesday. read more Advertisement · Scroll to continue Report an ad
"Companies will raise prices if and when they feel consumers are willing and able to pay them," said Nuveen's Chief Investment Strategist, Brian Nick, "It's become harder to do this in 2022 as wage growth slows and excess savings fall."
The global economy is mired in a serious slowdown, with some key economies at high risk of recession over the coming year, according to Reuters polls of hundreds of economists worldwide. read more Advertisement · Scroll to continue Report an ad
"There is a real concern that demand may be weakening, which will make it hard to justify further price hikes," said Nick.
Shops and supermarkets in Britain increased prices by 4.4% in the 12 months to July, the largest rise since these records began in 2005, reflecting a jump in food and transport costs, the British Retail Consortium said on Wednesday. Reckitt, maker of Dettol and Lysol cleaning products, on Wednesday raised its full-year revenue forecast after steep price hikes helped it beat second-quarter sales expectations.
Danone lifted its annual revenue growth forecast after second-quarter like-for-like sales beat analysts' estimates on strong demand for baby food and bottled water.
Like rival Unilever (ULVR.L), Reckitt and Danone's price rises have driven revenue. The biggest question for investors is how long that will continue.
"What we've seen is that the consumer has accepted these price increases but inflation is not pulling back," said Ashish Sinha, portfolio manager at Gabelli. "So as inflation increases, that raises questions on demand elasticity."
