Inflation and Consumer Demand Reallocation: Evidence from Retail Equity Performance in Metropolitan Houston
DOI:
https://doi.org/10.64137/31080030/IJFEMS-V2I2P101Keywords:
Inflation, Consumer Demand, Retail Markets, Stock Performance, Urban Economy, Purchasing Power, Demand CompositionAbstract
This study examines how inflation influences consumer purchasing behavior and the financial performance of retail firms within a large metropolitan economy. The analysis focuses on the Houston metropolitan market. It investigates whether rising prices alter the composition of demand between goods typically associated with higher-income consumption and goods that become relatively more attractive when household purchasing power declines. The research combines macroeconomic indicators, retail sales information, and stock market data covering the period from 2000 to 2025. An econometric framework is employed to evaluate the relationship between inflation, changes in consumer demand patterns, and the stock returns of retail firms. The empirical results indicate that periods of rising prices are associated with noticeable adjustments in household spending behavior. As purchasing power weakens, consumers shift a larger share of expenditures toward more affordable goods. Retail firms in these segments tend to experience stronger equity performance than those that depend more on discretionary spending. The findings highlight the importance of demand composition in explaining retail market outcomes during inflationary periods and provide insight for investors, policymakers, and researchers interested in the interaction between consumer behavior and financial markets.
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