Cathie Wood and Walmart Aren’t Speaking the Same Deflation Language

The deflationistas have been working themselves into a tizzy since Walmart Inc. Chief Executive Officer Doug McMillon warned of a period of declining prices at the big-box retailer in the months to come. But as a purveyor of goods, McMillon is talking about something very different — and actually quite normal — from what Cathie Wood and other deflation alarmists seem to have in mind. In fact, a period of falling goods prices might be just what policymakers need to slay too-high inflation once and for all.

First, consider the context. Here’s what McMillon said in his quarterly conference call with analysts on Thursday:

In the US, we may be managing through a period of deflation in the months to come. And while that would put more unit pressure on us, we welcome it because it’s better for our customers.

As he later clarified, he was mostly talking about Walmart’s “general merchandise” — so non-grocery stuff — and that’s nothing entirely new.

In the two decades before the Covid-19 pandemic, it was relatively normal for manufactured consumer products to decline in price or, similarly, for consumers to pay steady prices for ever-improving items (a sharper television, a more advanced mobile phone, etc.). Indeed, a quick search of Walmart’s earnings transcripts reveals plenty of instances of management discussing “deflation” in the past 20 years.

That stands to reason since Walmart is in some ways a proxy for the overall goods economy. From 2000-2019, core goods inflation measured by the consumer price index averaged 0%, and there were 118 months of year-over-year deflation. You might attribute that to a variety of factors, but globalization was the big one.

Good Deflation Is Nothing New