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    Fed Prepares Another Rate Increase as Wall Street Wonders What’s Next

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    Central bankers around the world have been picking up the pace of rate increases. Now the big question looms: When will they slow down?Federal Reserve officials are set to make a second abnormally large interest rate increase this week as they race to cool down an overheating economy. The question for many economists and investors is just how far the central bank will go in its quest to tame inflation.Central banks around the world have spent recent weeks speeding up their interest rate increases, an approach they’ve referred to as “front-loading.” That group includes the Fed, which raised interest rates by a quarter-point in March, a half-point in May and three-quarters of a point in June, its biggest move since 1994. Policymakers have signaled that another three-quarter-point move is likely on Wednesday.The quick moves are meant to show that officials are determined to wrestle inflation lower, hoping to convince businesses and families that today’s rapid inflation won’t last. And, by raising interest rates quickly, officials are aiming to swiftly return policy to a setting at which it is no longer adding to economic growth, because goosing the economy makes little sense at a moment when jobs are plentiful and prices are climbing quickly.But, after Wednesday’s expected move, the Fed’s main policy rate would be right at what policymakers think of as a neutral setting: one that neither helps nor hurts the economy. With rates high enough that they are no longer actively juicing growth, central bankers may feel more comfortable slowing down if they see signs that the economy is beginning to cool. Jerome H. Powell, the Fed chairman, is likely to keep his options open, but economists and analysts will parse every word of his postmeeting news conference on Wednesday for hints at the central bank’s path ahead.“It feels like 75 is kind of in the books — the interesting thing is the forward guidance,” said Michael Feroli, the chief U.S. economist at J.P. Morgan, explaining that he thinks the key question is what will come next. “It’s easier to slow down going forward, because every move will be a move into tightening territory.”The Fed’s latest economic projections released in June suggested that officials would raise rates to 3.4 percent by the end of the year, up from around 1.6 percent now. Many economists have interpreted that to mean that the Fed will raise rates by three-quarters of a point this month, half of a point in September, a quarter-point in November and a quarter-point in December. In other words, it hints that a slowdown is coming.But policy expectations have regularly been upended this year as data surprises officials and inflation proves stubbornly hot. Just this month, investors were speculating that the Fed might make a full percentage-point increase this week, only to simmer down after central bankers and fresh data signaled that a smaller move was more likely.That changeability is a key reason that the Fed is likely to emphasize that it is closely watching economic data as it determines policy. Its next meeting is nearly two months away, in September, so central bankers will most likely want to keep their options open so that they can react to the evolving economic situation.“Much as we’d like Mr. Powell to pull back from the Fed’s recent hyper-aggressive tone, it’s probably too early,” Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote in a research note ahead of the meeting.Still, there are some reasons to think that the path the Fed set forward in its projections could play out. While inflation has been running at the fastest pace in more than 40 years, it is likely to slow when July data is released because gasoline prices have come down notably this month.And, although inflation expectations had shown signs of jumping higher, one key measure eased in early data out this month. Keeping inflation expectations in check is paramount because consumers and companies might change their behavior if they expect quick inflation to last. Workers could ask for higher pay to cover rising costs, companies might continually lift prices to cover climbing wage bills and the problem of rising prices would be perpetuated.A variety of other metrics of the economy’s strength, from jobless claims to manufacturing measures, point to a slowing business environment. If that cooling continues, it should keep the Fed on track to slow down, said Subadra Rajappa, the head of U.S. rates strategy at Société Générale. While Fed officials want the economy to moderate, they are trying to avoid tipping it into an outright recession.“When you start to see cracks appear in the unemployment measures, they’re going to have to take a much more cautious approach,” Ms. Rajappa said.Markets have been quivering in recent days, concerned that central banks around the world will push their war on inflation too far and tank economies in the process. Investors are increasingly betting that the Fed might lower interest rates next year, presumably because they expect the central bank to set off a downturn.“It is very likely that central banks will hike so quickly that they will overdo it and put their economies into a recession,” said Gennadiy Goldberg, a rates strategist at TD Securities. “That’s what markets are afraid of.”But signs of slowing growth and easing price pressures remain inconclusive, and price increases are still rapid, which is why the Fed is likely to retain its room to maneuver.American employers added 372,000 jobs in June, and wages continue to climb strongly. Consumer spending has eased somewhat, but less than expected. While the housing market is slowing, rents continue to pick up in many markets.Plus, the outlook for inflation is dicey. While gas prices may be slowing for now, risks of a resurgence lie ahead, because, for example, the administration’s efforts to impose a global price cap on Russian oil exports could fall through. Rising rents mean that housing costs could help to keep inflation elevated.While Mr. Powell made clear at his June news conference that three-quarter-point rate increases were out of the ordinary and that he did “not expect” them to be common, Fed officials have also been clear that they would like to see a string of slowing inflation readings before feeling more confident that price increases are coming under control.“We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner,” Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in a Bloomberg interview this month.The central bank will get a fresh reading on the Personal Consumption Expenditures index — its preferred inflation gauge — on Friday. That data will be for June, and it is expected to show continued rapid inflation both on a headline basis and after volatile food and fuel prices are stripped out. The Employment Cost Index, a wage and benefits measure that the Fed watches closely, will also be released that day and is expected to show compensation climbing quickly.Given the recent decline in prices at the gas pump, at least two months of slower inflation readings by September are possible — but not guaranteed.“They cannot prematurely hint that they think victory over inflation is coming,” Mr. Shepherdson of Pantheon wrote. More

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    Voters See a Bad Economy, Even if They’re Doing OK

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    A New York Times/Siena poll shows remarkable pessimism despite the labor market’s resilience. That could be costly for the Democrats, and the economy.The fastest inflation in four decades has Americans feeling dour about the economy, even as their own finances have, so far, held up relatively well.Just 10 percent of registered voters say the U.S. economy is “good” or “excellent,” according to a New York Times/Siena College poll — a remarkable degree of pessimism at a time when wages are rising and the unemployment rate is near a 50-year low. But the rapidly rising cost of food, gas and other essentials is wiping out pay increases and eroding living standards.Americans’ grim outlook is bad news for President Biden and congressional Democrats heading into this fall’s midterm elections, given that 78 percent of voters say inflation will be “extremely important” when they head to the polls.

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    Thinking about the nation’s economy, how would you rate economic conditions today?
    Based on a New York Times/Siena College poll of 849 registered voters from July 5 to 7.By The New York TimesIt could be bad news for the economy as well. One long-running index of consumer sentiment hit a record low in June, and other surveys likewise show Americans becoming increasingly nervous about both their own finances and the broader economy.Economists have long studied the role of consumer sentiment, which can be driven by media narratives and indicators unrepresentative of the broader economy, like certain grocery prices or shortages of particular goods. At least in theory, economic pessimism can become self-fulfilling, as consumers pull back their spending, leading to layoffs and, ultimately, to a recession.Christina Simmons grew up poor and has worked hard to give her 7-year-old son a better life. She has climbed the ranks at the health insurer where she works near Jacksonville, Fla., and has more than doubled her salary over the past few years. Yet she feels as if she is falling behind.“I worked my butt off to get to where I’m at so I could take vacations with my son,” she said. “We would take off for the weekend and get a hotel room in another state, and go do a hike and see a waterfall and order a pizza in a hotel room and all of that. And I just can’t do that anymore.”Ms. Simmons, 30, is still able to make ends meet, partly because she is able to save money on gas by working remotely. But she is worried about what could happen if the economy slows and puts her job in jeopardy — one consequence of being promoted, she said, is that she is farther from customers, making her more vulnerable to layoffs. She has cut out modest luxuries, like a gym membership and nights out with friends, to build up her savings.“I’m saving the money just in case it gets even worse,” she said. “I’m being more strict than I have to because I don’t know how it’s going to go.”Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Fed Moves Toward Another Big Rate Increase as Inflation Lingers

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    As the Federal Reserve battles rapid inflation, officials are likely to stay on an aggressive path even as signs of economic cooling emerge.WASHINGTON — The Federal Reserve, determined to choke off rapid inflation before it becomes a permanent feature of the American economy, is steering toward another three-quarter-point interest rate increase later this month even as the economy shows early signs of slowing and recession fears mount.Economic data suggest that the United States could be headed for a rough road: Consumer confidence has plummeted, the economy could post two straight quarters of negative growth, new factory orders have sagged and oil and gas commodity prices have dipped sharply lower this week as investors fear an impending downturn.But that weakening is unlikely to dissuade central bankers. Some degree of economic slowdown would be welcome news for the Fed — which is actively trying to cool the economy — and a commitment to restoring price stability could keep officials on an aggressive policy path.Inflation measures are running at or near the fastest pace in four decades, and the job market, while moderating somewhat, remains unusually strong, with 1.9 available jobs for every unemployed worker. Fed policymakers are likely to focus on those factors as they head into their July meeting, especially because their policy interest rate — which guides how expensive it is to borrow money — is still low enough that it is likely spurring economic activity rather than subtracting from it.Minutes from the Fed’s June meeting, released Wednesday, made it clear that officials are eager to move rates up to a point where they are weighing on growth as policymakers ramp up their battle against inflation.The central bank will announce its next rate decision on July 27, and several key data points are set for release between now and then, including the latest jobs numbers for June and updated Consumer Price Index inflation figures — so the size of the move is not set in stone. But assuming the economy remains strong, inflation remains high and glimmers of moderation remain far from conclusive, a big rate move may well be in store.The Fed chair, Jerome H. Powell, has said that central bankers will debate between a 0.5- or 0.75-percentage-point increase at the coming gathering, but officials have begun to line up behind the more rapid pace of action if recent economic trends hold.“If conditions were exactly the way they were today going into that meeting — if the meeting were today — I would be advocating for 75 because I haven’t seen the kind of numbers on the inflation side that I need to see,” Loretta J. Mester, the president of the Federal Reserve Bank of Cleveland, said during a television interview last week.The Fed raised interest rates by 0.75 percentage points in June, its first move of that size since 1994 and one fueled by a growing concern that fast inflation had failed to fade as expected and was at risk of becoming a more permanent feature of the economy.While the big increase came suddenly — investors did not expect such a large change until right before the meeting — policymakers have begun to signal earlier on in the decision-making process that they are in favor of going big in July.Part of the amped-up urgency may stem from a recognition that the Fed is behind the curve and trying to fight inflation when interest rates, while rising quickly, remain relatively low, economists said.If Americans come to believe that inflation will remain high year after year, they might demand bigger wage increases to cover those anticipated costs.Scott McIntyre for The New York Times“It is starting to look like 75 is the number,” said Michael Feroli, the chief U.S. economist at JPMorgan Chase. “We’d need a serious disappointment for them to downshift at this meeting.”Fed interest rates are now set to a range of 1.5 to 1.75 percent, which is much higher than their near-zero setting at the start of 2022 but still probably low enough to stoke the economy. Officials have said that they want to “expeditiously” lift rates to the point at which they begin to weigh on growth — which they estimate is a rate around 2.5 percent.The way they see it, “with inflation being this high, with the labor market being this tight, there’s no need to be adding accommodation at this point,” said Alan Detmeister, a senior economist at UBS who spent more than a decade as an economist and section chief at the Fed’s Board of Governors. “That’s why they’re moving up so aggressively.”Central bankers know a recession is a possibility as they raise interest rates quickly, though they have said one is not inevitable. But they have signaled that they are willing to inflict some economic pain if that is what is needed to wrestle inflation back down.Mr. Powell has repeatedly stressed that whether the Fed can gently slow the economy and cool inflation will hinge on factors outside of its control, like the trajectory of the war in Ukraine and global supply chain snarls.For now, Fed officials are unlikely to interpret nascent evidence of a cooling economy as a surefire sign that it is tipping into recession. The unemployment rate is hovering near the lowest level in 50 years, the economy has gained an average of nearly 500,000 jobs per month so far in 2022 and consumer spending — while cracking slightly under the weight of inflation — has been relatively strong.Meanwhile, officials have been unnerved by both the speed and the staying power of inflation. The Consumer Price Index measure picked up by 8.6 percent over the year through May, and several economists said it probably continued to accelerate on a yearly basis into the June report, which is set for release on July 13. Omair Sharif, the founder of Inflation Insights, estimated that it could come in around 8.8 percent.“You do probably get a few months of moderation after we get this June report,” he said.The Fed’s preferred inflation measure, the Personal Consumption Expenditures index, may have already peaked, economists said. But it still climbed by 6.3 percent over the year through May, more than three times the central bank’s 2 percent target. Many households are struggling to keep up with the rising cost of housing, food and transportation.While there are encouraging signs that inflation might slow soon — inventories have built up at retailers, global commodity gas prices have fallen this week and consumer demand for some goods may be beginning to slow — those indicators may do little to comfort central bankers at this stage.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Gas Prices Force Many to Rethink Driving, and Spending

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    As summer trips beckon, some are traveling less, at least by car. And those candy bars at the convenience store may find fewer takers.KATY, Texas — Most Americans would gladly pay the $4.29 for a gallon of regular gas Buc-ee’s was charging this week on Interstate 10 between Houston and San Antonio, more than 50 cents below the national average.But with prices more than $1.50 a gallon higher than they were a year ago, even Texans are complaining, and changing their buying habits to make do.“It makes me so stressed out just thinking about buying gas,” said Nancy Oncken, a retired kindergarten teacher, as she filled up her station wagon on her way to join five cousins at a water park outside San Antonio for the long weekend. “It’s now always in the back of my mind to be conservative about what I buy.”When Ms. Oncken drives through Buc-ee’s, the well-known Texas-scale convenience store with enough gasoline pumps to fuel an army, she often buys a souvenir bumper sticker, tumbler or key chain adorned with the cartoonish bucktoothed beaver wearing a baseball cap. But this year, she said, she will keep a grip on her wallet.Drivers will get a bit of a break this Fourth of July weekend now that gasoline prices have eased about 15 cents a gallon over the last two weeks. But with the Russian invasion of Ukraine settling into a grinding war of attrition, constraining global energy supplies, gas prices are not likely to decline much more this summer.At $4.86 a gallon on Thursday, the national average price for regular gas was $1.67 above a year ago, according to the AAA motor club. The fuel prices are altering buying patterns, and there are early signs that people may be rethinking their driving.Economists report that travel spending remains strong this year because of pent-up demand after two years of the Covid-19 pandemic. But interviews with drivers at Buc-ee’s in Katy, Texas, suggest that consumer confidence is beginning to erode under the pressure of high prices for fuel, food and housing. Ms. Oncken and several others said the holiday weekend might be the only vacation they would take this summer, a sharp break from the past.A recent report by Mastercard SpendingPulse, which monitors national retail sales, showed that despite a roughly 60 percent increase in gasoline prices from last year, total spending at gas station convenience stores was up only 29 percent, suggesting that many like Ms. Oncken are compensating for gas prices by saving on little, whimsical indulgences.“Opting for a lower fuel grade, driving a bit less or skipping that slushy or candy bar in the store are part of a bigger picture of choices consumers are making every day in the face of higher prices,” said Michelle Meyer, U.S. chief economist at the Mastercard Economics Institute.The shock is particularly acute given that people grew accustomed to low gasoline prices during the pandemic, when oil prices collapsed from the decline in commuting and other economic activity.Understand Inflation and How It Impacts YouInflation 101: What’s driving inflation in the United States? What can slow the rapid price gains? Here’s what to know.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Greedflation: Some experts say that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Changing Behaviors: From driving fewer miles to downgrading vacations, Americans are making changes to their spending because of inflation. Here’s how five households are coping.It will take several months, at least, to sort out all the effects of higher prices on consumer behavior. People are spending more at restaurants than a year ago, and sales of luxury goods remain high, according to Mastercard. But hotel industry executives say many who drive on vacation are choosing destinations closer to home to save on gas.That may be one reason for the modest drop in gasoline prices in recent weeks. Recent Energy Department data suggested that the volume of gasoline sold nationwide had dropped 2 percent or more from a year earlier. And auto dealers in Houston said customer interest in more fuel-efficient cars, as well as electric and hybrid vehicles, was growing, although shortages of parts have limited the supplies of new models.Some transportation and energy experts say the demand for gas has declined partly because more people are flying rather than driving on vacations this year than last, although rising ticket prices and airport delays may reverse that trend as the summer progresses. In some cities, more people are returning to mass transit as concerns over Covid ease.Inflation and a slowing in some areas of the economy may mean some businesses are cutting back on shipping or shortening their supply chains when possible to save fuel.Energy Department data suggested that gasoline sales had dropped 2 percent over the last year.Scott McIntyre for The New York TimesGiovanni Circella, a transportation expert at the University of California, Davis, said that over the years, short periods of high gas prices had not fundamentally changed driving habits since people still needed to commute to work and carry on daily chores like shopping and driving their children to school and activities.“But what will change is if the gas prices stay high for an extended period of time, Americans will start changing the type of cars they drive,” he said.A report released this week by RBC Capital Markets found that over the last 30 years, retail gasoline prices in the United States increased more than 30 percent year over year during 39 individual months. Of those months, demand fell 2 percent or more from the previous year only 12 times. “In short, protracted demand destruction events have historically been rare,” the RBC report concluded.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Income and Spending Rose Less Than Prices in May

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    Americans’ income and spending failed to keep pace with rising prices in May, the latest sign that the fastest inflation in a generation is chipping away at the bedrock of the economic recovery.Consumer spending, adjusted for inflation, fell for the first time this year, declining 0.4 percent from April, the Commerce Department said Thursday. In addition, spending rose more slowly in the first four months of the year than previously reported, the government said, and after-tax income, adjusted for inflation, fell slightly.The report offered new evidence that the U.S. economy hangs in a delicate balance as the Federal Reserve tries to bring inflation under control. Policymakers want to cool off consumer demand for goods and services, which has outstripped supply, driving up prices. But if the central bank chokes off demand aggressively when prices are already crimping consumption, it could cause a recession.Consumers have hardly stopped spending. Overall demand remains strong, particularly for vacation travel, restaurant meals and other services that many families avoided earlier in the pandemic.Still, several forecasters said Thursday that they now believed U.S. gross domestic product, adjusted for inflation, shrank in the second quarter. That would be the second consecutive decline — a common, though unofficial, definition of a recession. Most economists say the United States has not yet entered a recession under the more formal definition, which takes into account a variety of economic indicators, but they say the risks are growing.The data released Thursday did hint at some potential moderation in inflation. The Personal Consumption Expenditures price index, which the Fed officially targets when it aims for 2 percent inflation on average over time, climbed 6.3 percent from a year earlier, matching the April increase. From a month earlier, it picked up 0.6 percent, a rapid pace as gas prices rose.But the core price index, which strips out volatile food and fuel prices, climbed 4.7 percent over the past year, down slightly from 4.9 percent in the prior reading. That core measure picked up by 0.3 percent from April, roughly matching the previous few months.Policymakers “are probably quietly sitting there and feeling a bit relieved” that core price increases have been moderating, said Ian Shepherdson, the chief economist at Pantheon Macroeconomics. But inflation remains very high, its outlook hinges on variables like the war in Ukraine, and the latest data is unlikely to lead the Fed to change course.“Now is not the time to declare even the hint of potential victory,” Mr. Shepherdson said.Inflation is taking a toll on consumers’ finances, and their economic outlook. Fifty-two percent of American adults say they are worse off financially than they were a year ago, according to a survey for The New York Times conducted June 13-19 by the online research platform Momentive. Ninety-two percent say they are concerned about inflation, including 70 percent who say they are “very concerned.”A line for a sale in New York. Because of inflation, Americans are spending more but getting less.Amir Hamja for The New York TimesUntil recently, there was little sign that consumers’ dour mood was affecting their spending much. But that may be starting to change. Consumer spending, not adjusted for inflation, rose 0.2 percent in May, the weakest gain this year, and spending on goods, where price increases have been fastest, fell.In other areas, consumers are spending more but getting less: Households bought almost exactly the same amount of gasoline in May as in April, for example, but paid 4 percent more for it.Tim Trull put $35 worth of gas in his truck one recent Friday, and was on empty again after a weekend trip to visit his parents 30 miles away. So he is looking for other places to cut back. Trips to the grocery store have become a dull routine: bread, cheese, eggs, milk, whatever lunch meat is on sale. Mr. Trull said he no longer even walked down the meat aisle.“I like my Raisin Bran, but I can’t even buy Raisin Bran,” he said. “Raisin Bran’s almost $7 a box right now.”Mr. Trull, 51, got a 50-cent-an-hour raise at Christmas, but inflation has more than wiped that out — especially because the furniture plant where he works in Hickory, N.C., has begun cutting back on overtime. Now, with talk of a recession, he is worried about losing his job.“I just have some bad feelings that eventually it’ll peter off and they’ll start laying people off again,” he said. “Who’s going to buy furniture when you’re deciding gas, food or a new love seat?”Stories like Mr. Trull’s highlight the risk facing the economy if the job market slows. Despite the dip in May, Americans’ income, in the aggregate, has mostly kept up with inflation thanks to rising wages and strong job growth.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Consumer Spending Weaker Than Reported, a Bad Sign for the Economy

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    Consumer spending was weaker in early 2022 than previously believed, a sign that cracks may be forming in a crucial pillar of the U.S. economy.Spending, adjusted for inflation, increased 0.5 percent in the first three months of the year, the Commerce Department said Wednesday. That was a sharp downward revision from the government’s earlier estimate of 0.8 percent growth, and a slowdown from the 0.6 percent growth in the final quarter of 2021. Spending on services rose significantly more slowly than initially reported, while spending on goods actually fell.Gross domestic product, the broadest measure of economic output, shrank 0.4 percent in the first quarter, adjusted for inflation, the equivalent of a 1.6 percent annual rate of contraction. That was only slightly weaker than previously reported, because the government raised its estimate of how much companies added to their inventories, partly offsetting the weaker consumer spending.Even after the revision, consumer spending remained solid in the first quarter. But any deceleration is significant because consumers have been the engine of the economic recovery. Spending had appeared resilient in the face of the fastest inflation in a generation — a picture that looks at least somewhat different in light of the latest revisions.“That prior estimate of first-quarter G.D.P. was much more comfortable than today’s look,” said Michelle Meyer, chief U.S. economist for the Mastercard Economics Institute. “There is reason for more concern after looking at today’s report.”Economists in recent weeks have steadily lowered their forecasts of economic growth for the rest of the year. IHS Markit estimated on Thursday that G.D.P. would grow at a 0.1 percent annual rate in the second quarter; earlier this month, it expected the economy to grow at a 2.4 percent rate this quarter. Some forecasters now say it is possible that economic output will shrink for the second consecutive quarter — a common, though unofficial, definition of a recession.The National Bureau of Economic Research, the nation’s semiofficial arbiter of when business cycles begin and end, defines recessions differently, as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”Most economists agree that, by that definition, the United States is not yet in a recession. But a growing number of economists believe that a recession is likely in the next year, as the Federal Reserve raises interest rates in a bid to tame inflation. More

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    Why Coupons Are Harder to Find Than Ever

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    Jill Cataldo is a master of coupons.She began cutting them out to save a dollar here and 50 cents there in the Great Recession, when she had two children in diapers and money was tight. Starting with a training session at the library in her Chicago suburb, she shared what she learned with others, and now has a syndicated column and a website where she writes about coupon deals and other ways to spend less.The pandemic, however, upended Ms. Cataldo’s world. Paper coupon inserts in the Sunday newspaper seemed flimsier. Even increasingly popular digital coupons were hard to come by.“There are brands that I’ve followed for over a decade that are just not issuing a lot of coupons right now,” Ms. Cataldo said. “It’s kind of frustrating, because it’s something we came to count on for a long time.”Now the steepest rise in the cost of living in four decades is making bargains even more coveted. “With inflation, this is what should go up tremendously as a tool to help customers,” said Sanjay Dhar, a marketing professor at the University of Chicago’s Booth School of Business.But that tool is getting ever harder to come by. In 2021, Kantar Media estimates, 168 billion circulated, across both print and digital formats. That was down from about 294 billion in 2015.The shrinking coupon market includes not just the number of coupons distributed but also the share turned in at checkout. Redemption rates declined to 0.5 percent of all print and digital coupons in 2020 from about 3.5 percent in the early 1980s, according to a paper by economists at Harvard University, Georgetown University and Heinrich Heine University Düsseldorf.The economists see a larger phenomenon: Increasingly time-strapped consumers don’t want to deal with even small hassles to save a few dollars on toothpaste.“The declining use of coupons and the declining redemption rates indicate a fundamental shift in consumer shopping behavior,” the authors wrote. They added, “We view this as additional evidence that declining price sensitivity reflects a longer-run secular trend.”At the same time, mobile phones have made all kinds of other incentives possible, including cash-back rewards, points that can be redeemed for store credit and contest prizes.“Practitioners often want to get discounts to consumers in a seamless manner,” said Eric Anderson, a professor of marketing at Northwestern University’s Kellogg School of Management. “It’s not clear that traditional coupons do this.”That explanation offers little consolation to people who’ve come to depend on coupons to keep their grocery costs down, like Ms. Cataldo’s readers.“I don’t think from the consumer perspective that they’re like, ‘Oh, we don’t care.’ We do care,” Ms. Cataldo said. “It’s just that we have fewer tools right now to play the game.”A Venerable IncentiveThe couponing industry as we know it started in the early 1970s when a Michigan printing company, Valassis Communications, began distributing booklets of discounts on particular products that could be redeemed at any store.Valassis would total up the slips of paper, and the manufacturer reimbursed the retailer for the discount. Soon, grocers saw the value of coupons in driving traffic to their own stores, and began newspaper inserts of their own. The number of print coupons distributed peaked in 1999 at 340 billion, as newspaper circulation also crested, according to Inmar Intelligence, the other large coupon settlement company, alongside Valassis.But a slide in redemption rates had already begun. It’s difficult to pin down why, but people close to the industry believe it’s related to the rise of the two-income household, as more women entered the work force. Ms. Cataldo remembers growing up in the 1980s, when, she said, her mother used coupons enthusiastically.“Back then it was a little bit of a different culture because we had so many stay-at-home parents who had time to do this,” she said. “It’s time that pays well, but you have to have that time, and if you are working eight hours a day, you probably don’t.”Coupon use enjoyed a resurgence during the recession of 2007-9, which left millions of people out of work much longer and with much less financial assistance than they would receive during the pandemic recession a decade later. “Couponing” became a widely used verb courtesy of the reality show “Extreme Couponing,” which brought people into the practice with promises of stackable discounts that could bring the cost of a shopping cart’s worth of purchases close to zero.But what delighted serious couponers dismayed manufacturers, which are focused on getting people to buy things they wouldn’t otherwise, not giving discounts to people who’d buy the product anyway. That’s why brands started pulling back on promotions and limiting the number of coupons that could be used in a given trip.At the same time, grocers and big-box stores were coming under pressure from e-commerce platforms like Amazon. They responded by beefing up their store brand offerings as well as asking companies like Procter & Gamble to lower prices on name-brand items.“They want to get the best deals so they are competitive at the shelf,” said Aimee Englert, who directs client strategy for consumer packaged goods companies at Valassis, now part of a company called Vericast. “What that ends up doing is constricting the budgets that manufacturers have to pull levers, like to provide a coupon.”As their wiggle room on discounts shrank, brands wanted to make sure they were squeezing as many extra purchases as possible out of their promotion dollars. The average value of coupons shrank, as did the time over which they could be used. And the rise of smartphones provided an opportunity that seemed far superior to blanketing neighborhoods with newsprint: Offers could be personalized and aimed at specific demographic profiles. Coupons could be linked to a supermarket loyalty card, which gave retailers data on whether the coupons prompted a shopper to switch brands.Greg Parks is another coupon blogger who got started in the wake of the Great Recession, looking to stretch his income to feed three children. Although he began with newspaper clippings all over his floor, he now does instructional videos exclusively using digital coupons, which can be used nationwide rather than in a single distribution area.Greg Parks is on the high end of coupon user sophistication.Luke Sharrett for The New York TimesMr. Parks at a CVS store where he often films videos on couponing.Luke Sharrett for The New York Times“I like to say that I’m a lazy couponer now,” Mr. Parks said. Plus, he has noticed that digital coupons cut down on dirty looks from cashiers when they have to process a stack of paper.“Some of them act like we’re stealing, or taking something from them,” Mr. Parks said. “They don’t want to deal with all those paper coupons, they’re such a headache. With digital, everything just automatically comes off.” (While only 5 percent of coupons distributed are digital, they represent about a third of all coupons redeemed, according to Inmar.)Mr. Parks, however, is on the high end of coupon user sophistication. Many people who depended most on print coupons — older shoppers on fixed incomes — may not have the computer or smartphone literacy to adopt the digital version. Dr. Dhar, the University of Chicago professor, said the switch to digital hit the wrong demographic.“That’s not the coupon-using population — they don’t use digital media very much,” said Dr. Dhar, who remembers surviving on coupons 30 years ago as a graduate student in Los Angeles. “A lot of this isn’t driven by the response to coupons. It’s driven by coupons not reaching the right people.”To be sure, manufacturers have not abandoned the pure reach of physical coupons. The free-standing insert still works as an advertising vehicle: In fact, the ideal outcome for a manufacturer is that a shopper sees a coupon and then goes to the store to buy the item without redeeming it.A Sudden Shake-UpIf coupons had been slowly dying for years, the pandemic delivered a sharp blow.Seemingly overnight, roiling supply chains and the lurch from office to home left consumers desperate to buy anything they could get their hands on; brand preferences went out the window. When inflation started to spike last year, not only did retailers have trouble keeping shelves stocked, they weren’t even sure they could maintain stable prices until the coupons expired.“The last thing those manufacturers want to do is put more incentives on those because it’s going to spike demand up even more,” said Spencer Baird, Inmar’s interim chief executive. “This is what we very consistently hear: ‘We’ve got a budget, we’re ready to go, but until we get my fill rate where it needs to be, I don’t want to mess up my supply chain.’”Use of even digital coupons sank in 2020, for the first time, before rebounding. While most of those are tethered to a specific retailer, the coupon industry is working on a universal standard that will allow shoppers to redeem digital coupons at any retailer that signs up.But there’s no guarantee that retailers will stick with coupons, when other incentives are gaining in popularity.Lisa Thompson works for Quotient, a company formerly known as Coupons.com, which started in 1998 as a website where you could print coupons rather than clipping them. The company is phasing out printable coupons, and the Coupons.com app already mostly offers cash-back promotions instead.“Honestly, it’s a dying form of savings, and we know that,” Ms. Thompson said. “A lot of my work has been working with the marketing team to make ‘coupon’ sound sexy.”Plenty of dedicated couponers still prefer the old-fashioned way.“I agree, it’s going down, and at some point it will die,” Ms. Cataldo said. “I’m not looking forward to that. But it’s not happening nearly as quickly as they thought it would.” More

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    Biden Weighs Tariff Rollback to Ease Inflation, Even a Little Bit

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    While lifting some levies on China is unlikely to put a large dent in inflation, administration officials concede they have few other options to address surging prices.WASHINGTON — President Biden is weighing whether to roll back some of the tariffs that former President Donald J. Trump imposed on Chinese goods, in hopes of mitigating the most rapid price gains in 40 years, according to senior administration officials.Business groups and some outside economists have been pressuring the administration to relax at least a portion of the taxes on imports, saying it would be a significant step that the president could take to immediately cut costs for consumers.Yet any action by the administration to lift the tariffs is unlikely to put a large dent in an inflation rate that hit 8.6 percent in May — while the political ramifications could be severe. An influential study this year predicted that a move to lift tariffs could save households $797 a year, but administration officials say the actual effect would most likely be far smaller, in part because there is no chance Mr. Biden will roll back all of the federal government’s tariffs and other protectionist trade measures.The tariff discussion comes at a precarious time for the economy. Persistent inflation has shattered consumer confidence, driven stock markets into bear territory — down 20 percent from their January high — and inflamed fears of a recession as the Federal Reserve moves quickly to raise interest rates.Some administration economists privately estimate the tariff reductions that Mr. Biden is considering would reduce the overall inflation rate by as little as a quarter of a percentage point. Still, in a sign of how big a political problem inflation has become, officials are weighing at least a partial relaxation anyway, in part because the president has few other options.The China tariffs are raising the price of goods for American consumers by essentially adding a tax on top of what they already pay for imported goods. In theory, removing the tariffs could reduce inflation if companies cut — or stopped raising — prices on those products.Mr. Biden has said taming inflation rests mainly with the Federal Reserve, which is trying to cool demand by making money more expensive to borrow and spend. The Fed is expected to raise interest rates on Wednesday, possibly making its biggest increase since 1994, as it tries to get persistent inflation under control. The prospect of big rate increases has spooked Wall Street, which entered bear market territory on Monday before steadying on Tuesday.Any move to tweak the tariffs could carry significant trade-offs. It could encourage companies to keep their supply chains in China, undercutting another White House priority to bring jobs back to America. And it could expose Mr. Biden — and his Democratic allies in Congress — to attacks that he is letting Beijing off the hook when America’s economic relationship with China has become openly hostile, deepening a wedge issue for the midterm elections and the next presidential race.China has yet to live up to the commitments it made as part of the U.S.-China trade deal that Mr. Trump negotiated, including failing to purchase significant amounts of natural gas, Boeing airplanes and other American products. Mr. Trump imposed tariffs on the bulk of products the United States imports from China as part of a pressure campaign aimed at forcing China to change its economic practices. More than two years later, the United States retains a 25 percent tariff on about $160 billion of Chinese products, while another $105 billion, mostly consumer goods, are taxed at 7.5 percent.While Mr. Biden has criticized the way in which Mr. Trump wielded tariffs, he has also acknowledged that China’s economic practices pose a threat to America.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Greedflation: Some experts contend that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.For Investors: At last, interest rates for money market funds have started to rise. But inflation means that in real terms, you’re still losing money.Business groups like the U.S. Chamber of Commerce and economists like Lawrence H. Summers, a Treasury secretary under President Bill Clinton, have urged the White House to repeal as many tariffs as possible, saying it would help consumers deal with rising prices.Mr. Summers and others have approvingly cited the March study on the issue from economists at the Peterson Institute for International Economics, who argued that a “feasible package” of tariff removal — which includes repealing a range of levies and trade programs, not just those applied to China — could cause a one-time reduction in the Consumer Price Index of 1.3 percentage points, amounting to a gain of $797 per American household.In an interview, Mr. Summers said reducing tariffs was “probably the most potent microeconomic or structural action the administration can take to reduce prices and inflationary pressure relatively rapidly.”But even those inside the administration who support easing the tariffs are skeptical that the move would produce anywhere close to the amount of relief that Mr. Summers and others have predicted.“I think some reductions may be warranted and could help to bring down prices of things that people buy that are burdensome,” Janet L. Yellen, the Treasury secretary and an advocate of some tariff rollbacks, told a House committee last week. “I want to make clear, I honestly don’t think tariff policy is a panacea with respect to inflation.”Ms. Yellen met on Tuesday with the board of directors of the National Retail Federation, which has long argued against the tariffs and recently made the case that eliminating them would ease inflation.One key question is whether companies that are given tariff relief would actually pass those savings on in the form of lower prices or choose to absorb them as profits. Consumers have so far continued to pay more for everyday items, a fact that corporations have cited in earnings calls with investors as a reason they can charge more.David French, senior vice president of government relations at the National Retail Federation, said the administration had been trying to understand how quickly tariff cuts would translate into pricing changes, and seeking assurances from retailers that any savings would be passed along to American consumers.“I think in the administration’s mind, there’s going to be a price rollback and money is going to come off the price tag,” he said. “I’m not sure you’re going to see a dramatic change like that.”Instead of price decreases, for example, stores may choose to hold off on increasing prices even more. Retailers “will do as much as they can to demonstrate dramatic changes in pricing where possible,” but they still face pent-up pressures in the supply chain in terms of cost, he said.Rising prices have socked Americans across the economy, draining families’ purchasing power and contributing to a steady decline in Mr. Biden’s approval ratings. The Consumer Price Index was up 8.6 percent in May from a year earlier, its fastest growth rate in 40 years. Mr. Biden says he has made fighting inflation his top economic priority.Unloading cargo at the Port of Los Angeles in March. The United States still has a 25 percent tariff on about $160 billion of Chinese products that was imposed by the Trump administration.Coley Brown for The New York TimesLast week, Mr. Biden announced a two-year pause on tariffs on imported solar panels, which could reduce costs for domestic consumers but which effectively pre-empted a Commerce Department investigation into illegal trade practices by Chinese manufacturers.Domestic trade groups, labor leaders and populist Democrats like Representative Tim Ryan of Ohio, who is locked in a competitive Senate race, have pushed Mr. Biden to keep the tariffs. Mr. Ryan held a news conference on Tuesday urging Mr. Biden not to yield any economic ground to Beijing.Economists disagree on how much inflation relief the administration could get by removing the tariffs.Inflation F.A.Q.Card 1 of 5What is inflation? More