With inflation, how do consumers adjust spending? The Beige Book tells all. : The Indicator from Planet Money June. School's out, the sun is shining and most importantly, the Beige Book is here again! Among the Federal Reserve Banks, which gave the best anecdote about how the economy is doing?

The Beigie Awards: The gallon is half full

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Hey. Hey, Robert. I see you're blowing up some balloons. What is going on here - some kind of inflation party?

ROBERT SMITH, BYLINE: Hey. Hey. That was going to be my joke, and then you just deflated the whole thing.

MA: Yeah, it's kind of obvious, Robert. But I couldn't help but notice that these balloons are sort of a boring, light tannish color.

SMITH: Yeah. Now that you point it out, these are not your usual colorful, festive balloons. They're more - how would we put it? - beige.

MA: Yes, they are. And that can mean only one thing.

SMITH: It's the Beigie Awards. And I'm your host, Robert Smith.

MA: And I'm Adrian Ma. It's a tradition here at THE INDICATOR that when the U.S. government releases their biquarterly economic report known as the Beige Book, we scan the pages carefully for the best anecdotes about the economy and give an award.

SMITH: And despite all these dull balloons around me, the latest Beige Book is a humdinger. Employers can't hire fast enough. Some companies have too much inventory. Some don't have enough. Inflation is everywhere. And with all this pressure...


SMITH: ...Something...


SMITH: ...Somewhere...


SMITH: ...Is going to...


MA: Do it. Do it. I'll plug my ears.


SMITH: ...Pop.


SMITH: Just a quick reminder of how the Beige Book works - there are 12 regional divisions at the Federal Reserve. They each choose their best stories about the economy to put inside the Beige Book, and then we pick the winner.

MA: And this time around, all the nominees centered around this tension in the economy. Businesses are recovering from the pandemic, and employment is growing. But high inflation and shortages are looming.

SMITH: And you can see how that might create some problems, which brings us to our second runner-up for the Beigies - the Boston Fed. They write this. Quote, "some Cape Cod restaurant owners plan to curtail service this summer due to labor shortages, but hotels and B&Bs on the Cape are planning for record-breaking occupancy and room rates based on advance summer bookings."

MA: So the Cape will be more crowded than ever.

SMITH: Yep - more tourists crowding the beaches.

MA: But restaurants are starting to limit their hours and service because they can't find enough workers.

SMITH: Yeah. There are going to be lines around the block close to the clam shack or the lobster pound - whatever you call it. So if you're going on summer vacation to the Cape, you should bring your own food, clearly.

MA: Yeah, right. Pack a lunch. And sticking with the food theme, our first runner-up prize goes to the Kansas City Fed for this intriguing sentence from the Beige Book. Quote, "some restaurants reported taking advantage of digital menus to implement real-time pricing on most items."

SMITH: And why am I guessing that real-time pricing doesn't mean the price goes down? It means the price goes up. And this actually explains why restaurants are keeping those QR code menus, right? Real-time pricing means that you should probably order dessert at the very beginning just in case the prices digitally go up.

MA: And our winning entry spotted how grocery store shoppers were responding to these higher price tags. Robert, please read the award-winning anecdote.

SMITH: One large grocery chain said that, quote, "customers have recently taken aggressive steps to save. They've shifted from national brands to cheaper store brands, and they're also doing things such as purchasing half a gallon of milk instead of a gallon."

MA: And the Beigie Award for that anecdote goes to...


MA: ...The Cleveland Fed.


MA: This is the Cleveland Fed's first Beigie.

SMITH: We gave out the award in a special ceremony last week. Coming up to the stage to accept the award is Guhan Venkatu. He leads the team that writes the Beige Book entry for Cleveland Fed.

GUHAN VENKATU: Thank you, Robert. It's a pleasure to be here today for the first time. I feel like we've been out of the medals for far too long, so we are excited to be getting some hardware.

SMITH: So have you been, I don't know, just goosing your Beige Book entries a little bit in order to grab this award?

VENKATU: We have been trying to get your attention. I don't think we've been misrepresenting what we've been hearing from the businesses we talk to. But, yes, we've been, I guess, trying to pizazz it up a bit.

MA: I mean, we are suckers for a little pizzazzing (ph). But the reason that we loved this Beige Book entry was that it actually goes into something deeper - like, the consumer psyche, why people are choosing small milk instead of big milk. And, you know, that is not the only thing that they're trading off.

VENKATU: One of the other things that we heard was because of the specific concern related to gasoline cost increases, consumers are economizing even on the number of trips they're making to a variety of retail outlets.

SMITH: So they're taking fewer trips and simply buying more to tide them over maybe an extra week or so.

VENKATU: That's exactly right.

SMITH: And they're doing so with not the top-shelf items, but maybe leaning down low where the generic cereal goes.

VENKATU: Yeah, that's exactly right. And interestingly, it's not just on the consumer side. On the business side, too, we've been hearing increasingly about so-called shrinkflation, where companies are trying to offer less for the same price. So we heard kind of an interesting story about pizza rolls where the entity didn't want to change its packaging. I think it was a dollar for a package of pizza rolls, but they were trying to find ways to reduce, say, the size of the pizza rolls that were in the packaging or the quality of the ingredients that went into the making of the pizza rolls. So both businesses and consumers seem to be trying to find ways to economize.

MA: So far, Guhan says that grocery stores are still able to pass on the price increases and the tiny pizza rolls to customers without a lot of pushback. But we wanted to see what this looked like from a grocers point of view, so we called up a grocery store in Guhan's district.

AMANDA ANDERSON: My name is Amanda Anderson, and I work at the Hills Market downtown in Columbus, Ohio.

SMITH: We read the Beige Book entry out loud to Amanda about the customers choosing the half-gallon milk instead of the full gallon of milk. And she says she's seeing these kind of choices all the time.

ANDERSON: I see a lot of six-packs of eggs selling more than I see a dozen eggs. I see a lot of snack cheeses that are smaller individual servings - selling individual bags of chips maybe versus the large bag of chips.

MA: And Amanda says it's a constant struggle to figure out which price to increase and by how much. Like, for instance, in her store, which is sort of a higher-end place, they stock a lot of local products - local sausage and coffee from a local roaster. And she says what they're trying to do is keep prices steady on those products to help out the local businesses but hiking prices on some national brands and some of their own prepared food items.

ANDERSON: We have a salad bar and a hot bar from our kitchen for lunchtime, and it's always been 8.99 for a pound for years. And then we - you know, our kitchen manager started looking at, like, the cost of goods, and we were just, like, losing money at 8.99 a pound. So we had to hike that up a dollar. We probably should have raised it more just to cover costs. But people were already, like, you know, in a tizzy over it being raised a dollar.

SMITH: You know, with the salad bar, you could have just put crappier items in there - just a lot of iceberg lettuce everywhere you see. That's the other way to handle inflation.

ANDERSON: We could. But yeah, we wanted to keep the quality the same.

MA: No offense to the iceberg lovers of America.

SMITH: Nobody loves iceberg lettuce, Adrian.

MA: That's cold, Robert. That's cold.

SMITH: Amanda says people seem to accept that inflation is happening, and it only really throws them off when something they buy regularly - you know, like the salad bar lunch or that $10 bottle of wine - is suddenly $2 more at the checkout. It's the surprise that gets them, really - not just the price.

MA: So hopefully, the Cleveland Fed and Guhan Venkatu won't be too surprised when we give them a slightly smaller, cheaper Beigie Award. Just like the pizza rolls - you know, we've got to save money, too.

SMITH: Is there an award case there at the Cleveland Fed?

VENKATU: I mean, we'll start one. I've got to say, Robert, I'm jealous of our counterparts at other Feds who have won not just once but twice, maybe three times.

SMITH: Well, as you know, in the economy, it's not the fastest that wins the race, you know? It's the most steady. It's the most reliable.

VENKATU: Slow and steady - yes, indeed.

SMITH: The Cleveland Fed motto.

VENKATU: That's what we want for inflation, yes.

SMITH: Exactly.

VENKATU: Exactly right.

MA: Guhan Venkatu and his hard-working anecdote collecting team at the Cleveland Fed are our winners of the Beigie Award.

VENKATU: Thank you. It's been a pleasure.

MA: This episode was produced by Nicky Ouellet and engineered by Robert Rodriguez. Catherine Yang (ph) checked the facts. Our senior producer Viet Le edited this episode. Our editor is Kate Concannon. And THE INDICATOR is a production of NPR.

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