Costco and TJX Companies should be able to manage the emerging transition to deflation by leveraging their deep value propositions to get customers to buy more. As inflation headwinds continue to ease, and perhaps at some point become tailwinds, their competitors will be able to better compete on price. So, Costco and TJX-owned T.J. Maxx, Marshalls and HomeGoods must stay on their games. The economy has been shifting from decades-high, Covid-fueled inflation to a period of disinflation. The consumer price index closed out 2023 with inflation continuing to cool. Excluding food and energy, core CPI rose 3.9% year over year , the lowest reading since May 2021. The Federal Reserve’s favorite inflation gauge, the core personal consumption expenditures price index, showed a 2.6% year-over-year increase in December. The Fed targets 2% as a healthy annual inflation rate. The question currently facing investors is whether the Fed will starting cut rates soon to pad the runway for an economic soft landing, which could boost the stock market. Signs of a resilient economy, however, have clouded that picture on worries that cuts could heat things too much and stoke inflation. The most recent example of an economy that won’t quit was on Friday when the government’s monthly look at job growth crushed estimates in January. In its epic battle to squash inflation, the Fed started raising rates in March 2022. It did so 11 times since then. Disinflation – which means inflation is still present, but prices are rising at a slower rate – has been the reward for slamming on the brakes. Deflation would be a step further as it’s when price levels actually decline. Wall Street sees a combination of both deflation and disinflation across most categories within retail. “Inflation has been moderating pretty consistently for the past several months, especially on the food side but also in other categories like general merchandise, apparel, and home items,” said Joe Feldman, analyst at…
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