(TND) — Target announced Monday that it was cutting prices on 5,000 items over the course of the summer.
The retailer said it had already reduced prices on about 1,500 items.
Food, diapers, paper towels and other essentials will see price cuts, Target said.
Good & Gather Unsalted Butter will be 20 cents cheaper, for example.
Purina One Chicken & Gravy Cat Food will be 40 cents cheaper.
Aveeno SPF 50 Sunscreen will be 70 cents cheaper.
And Clorox Scented Wipes will be 80 cents cheaper.
Is this a signal of lower inflation for American consumers?
“It's a signal,” Colorado State University economist Stephan Weiler said. “I mean, it's an isolated signal, but it's a signal.”
Some retailers got caught raising prices during a period of inflation, and Weiler said Target should be commended for pushing prices lower.
He’s also sure Target can absorb the lower prices.
“When you have a million items, you turn levers on 5,000 of them, it's not going to kill you,” Weiler said.
Target’s first-quarter earnings call is this Wednesday. Last fiscal year, Target’s sales dropped 1.7% to $105.8 billion, but its net earnings increased to $4.14 billion from $2.78 billion.
Target is the country’s sixth-biggest retailer, so Weiler said it could influence other retailers to lower prices.
But these price cuts alone won’t do much to move the needle on overall inflation, he said.
“Let's see whether we can build a little momentum this way,” he said.
Target’s move comes less than a week after somewhat positive news in the latest consumer price index, a popular measure of inflation.
The April CPI was 3.4% year over year, a welcome sign after March’s annual rate of inflation was 3.5%. The March report, which came after two months of 3.1% and 3.2% inflation, cause concerns that the trend of cooling inflation had stalled.
The CPI is up 22% over the last four years.
Weiler said the CPI didn't go down very much last time, but the combination of the slightly cooler inflation and the price cuts from a major retailer offers a “hopeful” outlook for price-weary customers.
Bankrate Senior Economic Analyst Mark Hamrick said Target’s move will become more meaningful if it lights the fuse for more price cuts across more retailers.
“I think they will be reducing prices where they can, where they have flexibility,” Hamrick said. “And part of that is enforcing price discipline on their suppliers and understanding that they need to drive their sales volumes as well.”
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