Inflation has finally started to hit the middle class households as higher prices hit the big stores. Will they start cutting back?

Middle-income consumers are finally starting to feel the pressure of rising food prices.

Indeed, for the first time last year, middle-income consumers — those with annual incomes of $40,000 to $80,000 — overtook low-income shoppers as the group hardest hit by rising grocery prices a report from Consumer insights and data company Numerator.

Suburban consumers have also seen a higher increase in groceries than urban and rural consumers.

With inflation rising over the past year, low-income consumers have been among those who have felt the biggest impact on their daily grocery budgets. Rising inflation has hit working-class families particularly hard, in part because they are spending more of their budgets on food, energy and housing.

But the gap between income groups closed in the week of May 8 and middle-income consumers were hit harder than lower-income groups in the week of May 15, with the average price of their groceries falling by 13.3% in comparison rose last year.

“Prices in today’s economy can present real challenges for middle-class households,” said Darren Seifer, food and beverage industry analyst at The NPD Group. “Your income may be too low to afford voluntary purchases, but also too high to qualify for assistance programs like SNAP or WIC.”

“With food and beverage shopping being a top priority, they may have to make difficult decisions about what’s reasonable for their budget,” he added. “They probably will Reduce restaurant usageand when shopping at grocery stores, we’ve seen more of them browse on-sale items, buy cheaper cuts of meat, or turn to private label to manage their grocery spending.”

A CNBC opinion poll The study, released in April, says sustained inflation would encourage more middle-income Americans — compared to those with lower and higher incomes — to eat less, drive less, and/or cancel a vacation and monthly subscription . (Low-income households were defined as households with annual incomes less than $50,000, middle incomes between $50,000 and $99,000 per year, and higher-income households of $100,000 and more.)

Higher prices hit big-box stores

The Numerator report, released on Wednesday, processes purchase data collected by Receipt Hog, Numerator’s mobile receipts app. Numerator analyzed the app’s users’ voluntary receipts, looked at the average spend per product across households, and compared data for different demographics.

Middle-income shoppers were likely to see higher grocery price increases due to recent price hikes at major stores including Target TGT,
and Walmart WMT,
and dollar stores, a Numerator spokesman told MarketWatch.

Both Target and Walmart reported significant profit declines in the first quarter of 2022, in part due to rising costs for everything from wages to transportation to warehousing. Walmart said in its earnings call that it would likely pass more of those costs on to consumers, raising grocery prices, but cutting prices on general merchandise to compensate.

Numerator purchasing data showed that middle-income shoppers spend more than other income groups on groceries at major retailers and dollar stores like Dollar General DG.
and family dollars.

Target, Dollar General and Family Dollar did not immediately respond to requests for comment.

According to the Numerator report, food prices increased by an average of 13.2% in 2022 compared to the previous year.

However, the price increases vary depending on the point of sale.

Among the shopping options is the “Online Channel” – which includes online retailers such as Amazon AMZN,
and Instacart — and the “dollar channel” — which includes dollar stores — have seen the highest year-over-year increases in grocery prices at 21.5% and 19.2%, respectively, according to Numerator.

The “club channel,” which Numerator defines as warehouse club chains like Costco COST,
and Sam’s Club continued to have the lowest grocery price increases of any channel at 7.3% year-over-year.

Higher prices may prompt lower-income consumers to “trade down,” analysts say, as they make changes to their shopping lists, such as buying new items. B. Buying chicken instead of beef.

Walmart CEO Douglas McMillon said on the company’s May conference call that consumers are changing their spending habits Abandonment of premium brands. He said consumers would choose cheaper versions of cured meats, dairy and bacon.

Related: “You only live once, man. I think it’s time to really embrace what we have.” Americans are bracing for a summer of blistering inflation Inflation has finally started to hit the middle class households as higher prices hit the big stores. Will they start cutting back?

Brian Lowry

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