Costco CFO Richard Galanti’s Recession Warning: Members of Costco are purchasing less beef and transitioning to less expensive proteins. When Costco has observed this change in consumer behaviour in the past, it has coincided with a recession.
Numerous financial experts have been warning for months that a recession is imminent. And it is difficult to determine how seriously to consider them.
As a result of Federal Reserve rate increases, consumer borrowing costs have increased significantly. This is likely to result in a decrease in expenditure, which could have an effect on the economy.
Alternatively, current economic indicators do not indicate a recession. In May, the national unemployment rate was 3.7%, and nearly 340,000 new jobs were added to the economy.
But if you ask Costco’s CFO, Richard Galanti, one specific Costco member behaviour indicates economic anxiety and sluggishness.
Costco CFO Richard Galanti’s Recession Warning: Consumers are purchasing less costly meats
Although Costco typically offers competitive pricing on groceries across the board, Galanti stated on the company’s most recent earnings call that members have reduced beef purchases in favour of cheaper proteins such as poultry and pork.
In addition, he stated, “Historically, within fresh protein, we’ve always witnessed a shift in sales penetration from beef to poultry and pork whenever there was a recession, whether it was in 1999 or 2000 or 2008, 2009, or 2010. We have now witnessed some of that.”
Now, the fact that Costco customers are purchasing less beef does not inherently indicate an economic recession. Rather, it could be a sign that consumers are concerned about a recession and are attempting to save money and increase their savings account balances in case economic conditions deteriorate. However, it is essential to monitor this pattern, because if a recession in 2023 is on the horizon, everyone must be prepared.
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How to prepare for a downturn
The issue with recessions is that they can cause an increase in joblessness. And if you have obligations to pay, going without an income for a period of time can be frightening.
Now is an excellent time to increase your emergency fund. If you only have enough money to cover two months of essential living expenses, you should attempt to save enough to cover three. The more money you have available, the less distressing a layoff is likely to be.
At the same time, endeavour to eliminate high-interest debt, such as any outstanding credit card balances. If you are unemployed, the last thing you want is another costly obligation dangling over your head.
Finally, strive to improve your job abilities. This will not guarantee that you will not be laid off, but it may reduce your chances. You may also want to consider obtaining a side gig not only to increase your savings, but also to have a backup plan in case you lose your primary job.
All things considered, the fact that Costco members are avoiding a more expensive grocery item may indicate that consumers are preparing for the worst. This does not guarantee a recession this year, but it is something to keep in mind and plan for accordingly.
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