As central bankers weigh the possibility of President Trump’s tariffs reigniting inflation, major companies are foreshadowing price increases and warning that shoppers are tightening their wallets.
Executives at several companies that sell popular consumer products, like toys and wet wipes, this week pointed to signs of a pullback in spending. The comments came against a backdrop of plunging consumer sentiment as many companies have said that they intended to pass the cost of tariffs onto customers.
Signs of slower spending and higher prices pose a challenge for the Federal Reserve, given its dual responsibility for keeping employment steady and inflation stable. Cutting rates could help address an economic slowdown, but the potential inflationary effect of tariffs have made officials cautious. The central bank is widely expected to keep interest rates steady on Wednesday.
“Having both firms and consumers saying prices are going to go up is not a good combination for the Fed,” said Diane Swonk, the chief economist at KPMG. “It’s yet another thing keeping them from doing anything with interest rates until they get more clarity on what the actual impacts are.”
Executives at Clorox said this week that sales fell 8 percent last quarter and that they expected the slowdowns to persist in the current quarter. The company said they will most likely raise some prices.
Linda Rendle, the chief executive of Clorox, said on a call with analysts on Monday that tariffs were changing consumer behavior “dramatically,” with shoppers adopting “a conserving behavior in many of our categories.”
Mattel, the toy company, told analysts on Monday that it was considering raising prices in the United States because of tariff-related cost increases.
Beyond pricing, Mattel executives said the company was taking steps to mitigate the impacts of steep U.S. tariffs on goods from China, where it makes roughly 20 percent of its toys sold in the United States. That involved moving more of its production to other countries, including India.
Mattel also scrapped its full-year financial forecast, citing the “evolving U.S. tariff situation” and the potential for Mr. Trump’s trade war to dampen consumer spending.
Denny’s, a restaurant chain, also reported this week that sales fell in the most recent quarter, which the company attributed in part to consumers’ concerns over tariffs and the job market.
“The tariff impact is how it overall impacts the macroeconomic environment, and what that does to our lower-end consumer that we rely quite a bit upon,” Robert Verostek, the chain’s chief financial officer, told analysts.