Although inflation has declined this year, grocery prices rose 0.3% sequentially in July and 3.6% year-over-year. While consumer spending rose to a six-month high in July, the growth is unlikely to be sustained with higher borrowing costs and the resumption of student debt repayments in October.
Despite an expected slowdown in consumer spending, the grocery industry is unlikely to be affected due to the non-discretionary nature of groceries. Consumers will likely reduce their discretionary expenditure and focus on the essentials. Therefore, it could be wise to add fundamentally strong grocery stocks Tesco PLC (TSCDY), Target Corporation (TGT), and Costco Wholesale Corporation (COST) to one’s watchlist.
