Friday5: Millennial's financial health plummets. Dad Fashion is back. Humanoid robot Digit goes into mass production. And more...
Plus, why does everything still feel so expensive? Probably the reason why consumers rushed to $20 all-you-can-eat shrimp deal at the Red Lobster
««Friday5- At a Glance»»
💸Why does everything still feel expensive, even when inflation has come down from its highs?
🦐Who can’t say no to $20 Ultimate Shrimp deal? Unfortunately, for Red Lobster, the promotion backfired.
👖Dad fashion is back. It could be related to consumer sentiment
🤖 Say hello to the 5’9” and 140 pound humanoid robot Digit that will go into mass production soon.
🤑WHY do millennials need $525K annually, a figure much higher than other generations to be happy?
💸Why does everything still feel expensive, even when inflation has come down from its highs?
Many things are actually getting cheaper, as inflation has come down from its highs. So, why does everything still feel expensive? Perhaps, it is because, prices are not falling for the items that Americans most want.
The prices of durable goods, meaning long-lasting items such as used cars or appliances, have fallen year-over-year for each of the last five months.
Many businesses in these sectors have recently needed to cut prices to encourage more demand, especially as Americans continue to spend despite record credit card debt.
Some economists estimate that the fall in goods prices could bring inflation back to the Federal Reserve's 2% target by the second half of 2024. In fact, per the Wall Street Journal, Morgan Stanley economists believe inflation could fall to 1.8% by next September, though some Federal Reserve officials are more cautious.
Still, while the prices of most durable goods are going down, many Americans aren't necessarily noticing or feeling the impact of these price declines as these purchases are pretty infrequent. Given Americans may invest in a laptop once every few years or buy a new desk twice per decade, lower durables prices may not amount to much compared to more frequent purchases.
On the other hand, the PCE for all nondurable goods shows an increase of nearly 1.6%. For food and beverages purchased for off-premises consumption, such as at a grocery store, prices increased over 2.4% year-over-year. Most food items, from meats to sweets, saw price increases, though dairy products on the whole became less expensive.
Clothing and footwear rose 2.5% year-over-year, as garments rose 2.9%. Other nondurable goods that saw price increases during the period include pharmaceutical and other medical products at nearly 4.1%, personal care products at almost 5.5%, and recreational items including games and pets at 0.5%.
For many Americans, everything still feels expensive, and still-high inflation for plenty of items, coupled with other financial pressures has contributed to many Americans' gloomy feeling about the economy. Even among the HENRYs — High Earners, Not Rich Yet, who make between $100,000 and $500,000, inflation has made many become more cautious about how they're spending. Many are pushing back home and car purchases, as well as delaying starting a family. Additionally, many wealthier Americans have resorted to shopping at dollar stores.
🦐Who can’t say no to $20 Ultimate Shrimp deal? Unfortunately, for Red Lobster, the promotion backfired.
Americans are hungry for cheap deals. Red Lobster learned that the hard way. In its latest quarter, profits tanked due to an overwhelming response to the chain's $20 Ultimate Endless Shrimp deal.
“Too many people took advantage of the low-margin offer, and it was one of the key reasons for the losses we generated in Q3 2023”, Ludovic Garnier, the global chief financial officer of the chain's owner, Thai Union Group, told investors during its November earnings call.
The chain rolled out the $20 all-you-can-eat shrimp promotion to increase the number of visits to its restaurant. Red Lobster had previously offered the long-standing promotion once a week. The chain tweaked it this year by offering the promotion every day.
They anticipated the promotion would give them a 20% boost in traffic. Instead, they got a 40% boost.
Though inflation is slowing, menu prices remain on the uptick, according to new federal data released in November. The Bureau of Labor Statistics reported that restaurant prices, or food away from home, increased by 5.4% in October year-over-year. Fast-food prices are rising even more, up by 6.2% over the past 12 months.
Garnier said the promotion "clearly shows that US diners are looking for value. For those who have been in the US recently, $20 was very cheap. We don't earn a lot of money at $20. That hurt the company's bottom line. It did not deliver what we were expecting.”
But instead of scrapping the promotion, the chain gradually raised its price from $20 to $22. It's now at $25.
👖Dad fashion is back. It could be related to consumer sentiment
Think sneakers, durable boots, flannels, big sweatshirts, baseball hats, cargo pants, Kramer, and, yes, jorts.
Dad-style stalwart brands like New Balance and L.L. Bean have exploded in popularity and the hashtag "newbalance" has four billion views on TikTok. GQ celebrated "Stylish Dad Week" over the summer for Father's Day, and even compiled their own listicle of famous guys who "made dad style look glorious."
It's a stark contrast to the sexier trends that characterized the early post-Covid era such as old money, night luxe, and indie sleaze. So why did those evolve into dad fashion?
One answer could be in the economy. Prices are still high, the once-hot jobs market has cooled along with pay raises, and young people in particular are struggling with heavy debt loads that they can't pay off.
Younger consumers in particular feel dreary about the economy, according to a New York Times/Siena College poll of 3,662 voters in Biden swing states. Just 11% of Americans ages 18 to 29 polled from October 22 to November 3 said that they feel excellent or good about the economy and 89% said it was poor or only fair. Consumer sentiment is low, albeit not as bad as it was during the drearier days of 2022, when inflation was even higher and layoffs were dominating headlines.
All of that might explain why dad fashion is once again dominant. Previous eras of dad fashion took place during the mid-90s and the 2010s. In the 1990's, Seinfeld popularized a dad vibe. People loved Kramer's outfits so much that it became difficult to source them.
Dad fashion seems to show up when consumers are feeling wary — not the worst they've felt, but certainly not the best. That might make sense: If anything, dads are known for being pragmatic, and maybe just a tad jaded. That sense of economic grumpiness might be inadvertently showing up in that dad fashion.
🤖 Say hello to the 5’9” and 140 pound humanoid robot Digit that will go into mass production soon.
Agility Robotics says that its RoboFab manufacturing facility will be the first to mass-produce humanoid robots, which could be nimbler and more versatile than their existing industrial counterparts.
Agility Robotics, which makes a bot named Digit that's being tested by Amazon, plans to open RoboFab early next year, inaugurating what CEO Damion Shelton calls "the world's first purpose-built humanoid robot factory."
Agility has produced about 100 robots since its founding in 2016, and plans to move Digit production from its Tangent, Oregon headquarters to the more spacious 70,000-square-foot RoboFab facility in the coming months. At first, production will be in the hundreds, but eventually RoboFab is "going to have a significantly larger capacity of 10,000 robots per year, peak," Shelton says.
Amazon, which deploys a multitude of purpose-driven robots, recently announced that it's testing Digit at a laboratory south of Seattle.
"Our initial use for this technology will be to help employees with tote recycling, a highly repetitive process of picking up and moving empty totes once inventory has been completely picked out of them. Further Digit can move, grasp, and handle items in spaces and corners of warehouses in novel ways and that its size and shape are well suited for buildings that are designed for humans," per Amazon's announcement.
Amazon has invested in Agility through its Industrial Innovation Fund. The companies won't say how much, but it's been reported that Amazon was part of a $150 million funding round that Agility Robotics completed in 2022.
Fun fact: Digit, who is 5'9" and 140 pounds, can walk over and plug itself in when it needs to recharge.
🤑WHY do millennials need $525K annually, a figure much higher than other generations to be happy?
In my last Friday post, I had talked about that millennials want half a million dollars annually to be happy. I had also pointed out that's a lot higher than what both older and younger generations want, per a recent survey.
➡️ In today’s Friday 5, I will tell you why that might be the case.
While each person might have a different idea of the true price of happiness, there's no argument that it's a difficult time for many Americans and millennials in particular.
While inflation has somewhat cooled from its peak in 2022, millennials' financial well-being has plummeted, according to Morning Consult's latest iteration of its well-being index.
While baby boomers' well-being score rose to 4.04 from August 2022 to August 2023, millennials' score declined to .94, the biggest decline across all age groups.
Big debt loads are a contributor to millennials' financial well-being right now. Federal student-loan payments resumed in October after a 3 year pause. Today, millennials hold the most student debt out of every generation, with the average amount for a millennial totaling $42,637, which is above the $35,000 average for all borrowers.
Additionally, a recent survey from the New York Federal Reserve found that millennials are the only generation with credit card delinquencies exceeding pre-pandemic levels.
had shared this image on his post earlier this week, which will paint the picture that I am talking about.
Consumer debt isn't the only thing constraining millennials right now. The cost of childcare has tripled since 1991, according to Bureau of Labor Statistics data, and the price of baby food and formula has more than doubled since 1997, per NielsenIQ data.
On top of that, high housing costs pose an additional strain with over 75% of homes on the market are too expensive for middle-class buyers, per a June study from the National Association of Realtors, and a record 85% of Americans surveyed by Fannie Mae in October said it's a bad time to buy a home.
"That means less money for a 401(k), savings, college, starting a small business, repairs to your house. Just the basic stuff becomes more and more difficult. So the stress is real, especially for Gen Z and millennials,” millennial Rep. Jimmy Gomez said.
So while it's a rough time for many Americans' finances right now, millennials are being hit with high costs from all sides, and it's unclear how soon their consumer sentiment will improve and whether their salary expectations will change.
Dad fashion never left!
Why I don't feel better after inflation has "come down"? Because the damage has already been done. Prices are higher, permanently so. Just because inflation isn't sky-high anymore doesn't mean that the prices are coming down; they're permanently pegged at the higher level. People have already adjusted their spending habits to compensate.
We'd need a good round of deflation for me to start feeling better again.