The Grocery Basket Recession
What Americans Stop Buying Before the Economy Says Recession
The U.S. economy can keep growing while households quietly behave as if it were already shrinking. The first warning may not come from GDP, unemployment or Wall Street. It may come from the supermarket basket.
There is something strangely revealing about a jar of spices.
McCormick reported fiscal third-quarter sales of $2.02 billion, apparently an impressive result. Reported sales were up 17.4% from a year earlier.
At first glance, it looks like another example of a resilient American consumer.
Look underneath the headline, however, and the picture changes.
A large part of the increase came from the McCormick de Mexico acquisition. Organic sales grew only 1.9%. Prices increased 2.2%, while organic volumes actually declined 0.3%.
More importantly, volumes in Consumer Americas fell 2.5%. Management pointed to pressure from elevated gasoline prices and weaker traffic across grocery and foodservice channels.
That is considerably more interesting than the 17.4% headline.
Because Americans are not abandoning food.
They are changing what they consider worth paying for.
And that distinction may tell us considerably more about the condition of the American household than another argument over whether GDP technically satisfies somebody’s definition of recession.
The recession that does not appear in GDP
Traditional recessions are relatively easy to recognize retrospectively.
Production contracts. Employment deteriorates. Investment falls. Consumption weakens. Eventually economists date the downturn.
But households do not wait for economists.
They adjust continuously.
And the adjustment normally happens in layers.
A family does not stop buying food because gasoline becomes expensive.
It changes the food basket.