Macy’s and Best Buy released their quarterly earnings reports Thursday. These big box chains sell some of the discretionary items, like clothing and electronics, that we spent an awful lot on early in the pandemic.
The two companies are telling a similar story. Sales of those “extras” are finally declining while consumers adjust to the pressures of inflation. Meanwhile, retailers like Walmart and Target that also sell groceries are faring a bit better.
So, while people are rebalancing their budgets to accommodate their needs, what’s getting slashed in the “want” category?
Freelance writer Abigail Geiger’s housing costs in Orlando, Florida, basically doubled in the last year. So, she’s been spending a lot of time with her budgeting spreadsheet.
“I sat down with myself and I was like, ‘OK, this is gonna be a really frugal year, two years,’” Geiger said.
A “considerable slowdown” in wage growthJun 7, 2023
What’s behind the SEC’s crypto lawsuits?Jun 6, 2023
Saudi Arabia’s oil cuts may not mean higher gas pricesJun 5, 2023
Her Spotify subscription was the first to go, then her gym membership. Plus, she’s not going out as much.
“If it’s, like, a special occasion or someone’s in town, I’ll definitely do that, but I’m not about to go have a random cocktail that ends up costing, like, $25,” she said.
The takeout budget has been an obvious target for downsizing in Jennifer Lee’s household.
“In my humble opinion, I think food prepared by someone else always tastes better,” said Lee, a senior economist at BMO Capital Markets.
Extra pandemic savings and pent-up demand have made consumer spending on extras surprisingly resilient, she said. But inflation and higher interest rates are catching up with us.
Lee sees signs that we’re starting to pull back on travel, entertainment, “even things like clothing,” she said. “I mean, of course we all need clothes, but do you need that new outfit from insert-designer-name-here, you know?”
And some consumers’ definition of “discretionary” is shifting. That’s the case for Val Harrington, a Ph.D. student living in Baltimore.
“I’m actually, like, kind of a fiend for goat cheese,” she said. That goat cheese was something she used to consider an occasional treat at the grocery store. Now, it’s a rare luxury.
Even Harrington’s pets are making sacrifices. “Things like changing our cats’ cat food brand to one that’s a lot less expensive, even though previously we had been getting, like, pretty good quality food for them,” she said.
Higher human food prices — plus housing and energy costs — have her rethinking what goes on the necessities list.