You already pay more for groceries and gas. This is where consumers will feel the next round of “sticker shock”.

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Consumers may already be reeling from higher prices for things like groceries and energy, but S&P Global Ratings says inflation holds more surprises.

“Packaged food and household product companies still have to go through all
their price increases, so consumers are likely to face more shocks before prices stabilize,” Sarah Wyeth wrote in a note released Thursday.

“As grocery and gas bills increasingly squeeze budgets, we expect consumers to postpone some spending and switch to lower-priced brands in the second half.”

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The inflation rate in the United States has reached a 40-year high of 7.5%. With prices heading north, some shoppers are already tightening their belts with off-brand everyday goods.

But for many buyers, government stimulus programs and other COVID-related conditions have provided a cushion.

“We believe the financial comfort of excess savings is supporting this strong consumer spending, as is the tight labor market,” the S&P wrote.

“Our rating shares in the US retail sector continue to reflect this positive momentum.”

Don’t miss: Inflation is causing some shoppers to turn to off-brand products to save money, but they’re not always cheaper

The S&P predicts that inflation will eventually cause buyers to take a closer look at their budget. Retailers will have to respond with discounts and other measures.

“We believe credit quality improvement will slow in the second half of the year as retailers will have to resort to sales and promotions to move products when consumers are less eager to shop.”

The SPDR S&P Retail ETF XRT,
-0.78%
rose slightly by 0.8% over the past year, but has fallen more than 24% over the past three months.

The benchmark S&P 500 SPX index,
-0.72%
is up 11.6% over the past 12 months.

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