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Businesses Want To Raise Prices Further, But Customers Have Had Enough


Paul Weaver/SOPA Images/LightRocket via Getty Images' title='The McDonald's logo is seen on a sign outside the fast food restaurant'>

Paul Weaver/SOPA Images/LightRocket via Getty Images

Key TakeawaysIn a Federal Reserve report, businesses all over the country said they were having difficulty raising prices because of pushback by customers whose budgets have been strained by years of high inflation.One restaurant owner in Montana predicted customers would balk at paying $20 for a hamburger.The phenomenon was widespread across the Federal Reserve districts in the Beige Book, which collects reports from all over the country.
U.S. consumers have a message for businesses, and it rang out loud and clear in a Federal Reserve report Wednesday: they are not going to pay $20 for a hamburger.The Fed’s Beige Book, a compilation of anecdotal reports from regional Fed banks around the country, was shot through with observations that shoppers everywhere are fed up with high prices, leaving many businesses reluctant to raise them. Those feelings were summed up by a Montana business owner who told the Minneapolis Fed he was trying to avoid passing further cost increases to his customers. “At some point, they will say, ‘I am not paying $20 for a hamburger,’” the report quoted the owner as saying.  The report provided a striking example of how household budgets, already stretched by high inflation since 2021, are reaching their limit for how much they’re willing to spend on things. Customer pushback is leading merchants to offer discounts in hopes of winning back or retaining patrons. For example, fast food restaurants including McDonald’s and Burger King, have begun offering “value meal” promotions.Consumers Across the Country Are Fed Up With Price IncreasesThe Beige Book suggested the phenomenon is widespread. “Contacts in most Districts noted consumers pushed back against additional price increases, which led to smaller profit margins as input prices rose on average,” the report said. “Retail contacts reported offering discounts to entice customers.”The Boston Fed said businesses in that district were planning for ”muted price growth on balance moving forward, as there was concern about consumer pushback from significant further price increases.”The Cleveland Fed noted, “One business services contact said that passing along cost increases had become more difficult as customers were more closely managing their costs."In Atlanta: “Some firms reported holding prices steady in response to increasingly price-sensitive consumers.”And in the Dallas district, it was manufacturers facing customer rebellions over price: “Contacts noted that they were experiencing a strong resistance to price increases, with one saying that customers ask to hold prices to last year’s level, which isn’t possible given the increases in costs.”  Read the original article on Investopedia.

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