Inflation divide: the rich splurge, the poorest fall back

NEW YORK — Americans at the bottom of the income scale are again struggling to make ends meet.

A confluence of factors — the expiration of federal stimulus checks and soaring inflation on basics like gasoline and food — are driving an even wider gap between the haves and have-nots.

While wealthier shoppers continue to splurge, lower-income shoppers have pulled back faster than expected over the past two months. They focus on the necessities while turning to less expensive items or less expensive stores. And they only buy a few at a time.

It’s a reversal from about a year ago, when low-income shoppers, fueled by government money and supported by wage increases, could spend more freely.

Kisha Galvan, a 44-year-old mother of eight aged 9 to 27, was able to shop for the week and buy extras like clothes and shoes at Walmart for her children last year.

But without pandemic-related government support and near-40-year inflation, she buys more canned goods and depends on the local food pantry several times a week instead of once a week.

“I shop from meal to meal,” said the Rockford, Illinois resident, who has lived with a disability for 15 years. “Before, we didn’t have to worry about what we were going to get. We’re just going to get it.

The deep spending divide was reflected in the latest round of quarterly results from retailers. At the higher end of the spectrum, Nordstrom and Ralph Lauren saw stronger-than-expected sales as their well-heeled buyers returned to pre-pandemic routines. Lululemon also reported strong quarterly sales of its expensive sportswear.

But at the other end, Walmart customers are turning to cheaper lunch meats and half gallons of milk from full gallons. Kohl’s, a mid-priced department store, said its customers are spending less with each visit. And Gap cut its annual financial outlook, specifically citing inflationary pressure at its discount chain Old Navy.

Dollar Tree and Dollar General, which historically benefit from lower buyer prices during tough economic times, raised their selling outlook last month. Meanwhile, discounter Big Lots suffered a sharp drop in sales over the past quarter, noting reductions in items like furniture.

“We are now in a new chapter where high inflation significantly limits consumers’ ability to make discretionary purchases, especially high-priced items,” Big Lots CEO and President Bruce K. Thorn told analysts. at the end of last month. “We know that many Americans are living paycheck to paycheck again.”

The decline in low-income buyers has not affected overall spending, which is still on the rise. In April, the government said retail sales outpaced inflation for a fourth consecutive month, a reassuring sign that consumers – the main drivers of the US economy – continue to provide vital support and help ease the pressures. concerns about the proximity of a recession.

But analysts think even affluent buyers could pull back if the stock market continues to weaken. Marshal Cohen, chief industry adviser at market research firm The NPD Group Inc., said the stock market is “psychologically” affecting high-income buyers and more paper losses could cut them.

The spending mood has changed since last October and November, when the Fed conducted a survey and found that nearly eight in 10 adults are “doing well or living comfortably” when it comes to their finances in 2021, the highest proportion. highest to say so since the survey began in 2013.

For those earning less than $25,000, the proportion who said they were doing at least well rose from 40% to 53%.

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