Credit Suisse: Total basket up 2.7% year over year; highest rate of price inflation in two years

NEW YORK — Financial services firm Credit Suisse tabulated total basket increases of 2.7% year over year and 1% month over month for retail.

“Our monthly pricing survey in Dallas and Chicago showed that all retailers raised prices on a year-over-year and month-over-month basis with the exception of Jewel [a Supervalu banner operating in Chicago],” Credit Suisse research analyst Ed Kelly wrote in a note published Monday.

And though recent comments from Dollar General and Walmart suggested that lower-end consumers are beginning to feel the pinch from higher costs, retailers are by and large successfully passing those price increases along to the consumer. “Thus far, the pricing environment has remained rational, although the key player to continue watching is Walmart,” Kelly noted.

That increase in product pricing is accelerating most significantly across food items, Kelly noted. “Inflation was highest in our food basket, up 6.5% year over year, an acceleration from 3.4% last month,” he wrote. Health and beauty inflation was up 0.7% year over year, versus 2.9% in May. On a month-over-month basis, food inflation totaled 2.6%; conversely, average price changes were down across health and beauty products by 0.9%.

Walgreens and CVS/pharmacy had some of the greatest pricing disparities, as compared with everyday-low-price value leader Walmart. In the Chicago market, Walgreens relative pricing was 28.3% higher than Walmart; CVS’ prices were 21.9% higher. In Dallas, CVS/pharmacy relative pricing was 30.9% higher than Walmart, and Walgreens was 25.6% higher.

That’s not altogether a bad situation for the two drug retailers tracked in the Credit Suisse pricing survey but bears watching, Kelly cautioned. “We believe that drug stores are among the best-positioned retailers to pass along inflation, but they must remain vigilant not to let their pricing gap versus other formats increase too much,” he said.