NEW YORK (AP) – Americans at the low end of the income rung are once again struggling to make ends meet.
A confluence of factors – the expiration of federal stimulus checks and surging inflation on staples like gas and food – are driving an even bigger wedge between the haves and have-nots.
While wealthier shoppers continue to splurge, low-income shoppers have pulled back faster than expected in the past two months. They’re focussing on necessities while turning to cheaper items or less expensive stores. And they’re buying only a little at a time.
It’s a reversal from a year or so ago when low-income shoppers, flush with money from the government and buoyed by wage increases, were able to spend more freely.
Kisha Galvan, a 44-year-old mother of eight children from ages nine to 27, was able to stock up on groceries for the week and buy extras like clothing and shoes at Walmart for her children last year.
But without the pandemic-related government support and inflation hovering at a near 40-year high, she is buying more canned food and depending on the local food pantry several times a week instead of once a week.
“I shop meal to meal,” said the Rockford, Illinois resident who has lived on disability for the past 15 years. “Before, we didn’t have to worry about what we were going to get. We just go get it.”
The deep divide in spending was reflected in the latest round of quarterly earnings for retailers. At the high end of the spectrum, Nordstrom and Ralph Lauren reported stronger-than-expected sales as their well-heeled shoppers returned to pre-pandemic routines. Lululemon also reported strong quarterly sales of its pricey athletic wear.
But on the other end, Walmart’s customers are switching to cheaper meats and half gallons of milk from full gallons. Kohl’s, a mid-priced department store, said its customers were spending less on each visit. And Gap slashed its annual financial outlook, specifically citing the strain from inflation at its low-price Old Navy chain.
Both Dollar Tree and Dollar General, which historically benefit from shoppers trading down during difficult economic times, raised their sales outlooks last month. Meanwhile, discounter Big Lots suffered steep sales declines in the latest quarter, noting cutbacks in items like furniture.
“We are now in a new chapter where high inflation is greatly limiting the ability of consumers to make discretionary purchases, especially of high ticket items,” Big Lots CEO and President Bruce K Thorn told analysts late last month. “We know that many Americans now are once again living paycheque-to-paycheque.”
The pullback among low-income shoppers has not affected overall spending, which is still up. In April, the government said retail sales outpaced inflation for a fourth straight month, a reassuring sign that consumers – the primary drivers of America’s economy – are still providing vital support and helping ease concerns that a recession might be near.