Middle-class shoppers are turning to discounters as rising inflation hits household budgets

Middle-class shoppers, plagued by decades of high inflation, have turned to discounters, boosting sales at Walmart and Dollar General.

While inflation has fallen to 7.7 percent, it remains stubbornly high as Americans feel the pain along the grocery lines and many choose to seek better deals.

While bread and milk cost $4.79 and $8.99 respectively at upscale Whole Foods, the same items cost almost half as much at Walmart and even less at Dollar General.

Similar savings can be had on a pair of steaks, which sell for nearly $32 at Whole Foods, while Walmart sells it for $16.77 and Dollar General for just $9. If it’s a dozen eggs, Whole Foods costs about $5.49, Walmart sells them for $3.23, and Whole Foods sells them for $5.49.

Meanwhile, butter is $9.99 at Wholefoods, where it’s only $4.48 at Walmart and $4.45 at Dollar General. And flour costs about $6.39 at Whole Foods, where it’s $3.83 at Walmart and $4.50 at Dollar General.

On Tuesday, Walmart reported annual U.S. sales growth of 8.2 percent year over year, beating Wall Street expectations as shares rose 7 percent as of midday.

The company found that about 75 percent of Walmart’s sales growth was driven by households making $100,000 a year, demonstrating the middle-class flight to its stores for better deals.

This was announced by GlobalData retail analyst Neil Saunders CNN: ‘Though times are tougher, consumers’ desire for value and low prices is playing into Walmart’s hands.’

Dollar General, which regularly boasts of low prices, has also seen an influx of wealthier consumers due to inflation, with its shares up almost 4 percent on Tuesday and 12.66 percent over the past year.

More middle-class shoppers are turning to Walmart, Dollar General and other discount stores for better deals on groceries to save money amid rising inflation

More middle-class shoppers are turning to Walmart, Dollar General and other discount stores for better deals on groceries to save money amid rising inflation

Annual consumer inflation fell below 8% last month for the first time in eight months

Annual consumer inflation fell below 8% last month for the first time in eight months

With annual US sales growth of 8.2 percent year over year, Walmart has credited its recent success to an influx of wealthier shoppers looking for bargains amid high inflation.  Pictured are shoppers at a Walmart in Brunswick, New Jersey

With annual US sales growth of 8.2 percent year over year, Walmart has credited its recent success to an influx of wealthier shoppers looking for bargains amid high inflation. Pictured are shoppers at a Walmart in Brunswick, New Jersey

In addition to reporting sales growth, Walmart noted in Tuesday’s report that sales of its own private label were also up, suggesting shoppers are choosing to keep branded to save at the checkout.

The store also saw a significant three-month boost from its US back-to-school season promotions.

John David Rainey, Walmart’s Chief Financial Officer CNBC that the surge in purchases at the company’s stores reflects the reality of Americans who are still cash-strapped.

“Paperbacks are stretched,” he said. “People have less disposable income or less disposable income to spend on things — and so they’re looking for value.”

Dollar General cited a similar effect, but the supermarket chain’s Ohio stores are under investigation for allegedly taking advantage of people looking for better deals.

In early November, Ohio Attorney General Dave Yost accused at least 20 stores in the state of price gouging, with inspectors finding up to 88 percent cheaper on the shelves than at the actual checkout.

“Ohioans can’t afford companies that lure people in with promises of low prices just to fool them at the checkout,” Yost said in a statement. “This appears to be a company trying to make extra money and hoping no one notices.”

On Monday, five stores in Franklin County, Ohio, failed a second inspection over price gouging. ABC 4 reported.

Overall, food and drink prices across the country have soared 11.2 percent over the past year due to inflation, with meat and poultry prices up 9 percent and dairy products up nearly 16 percent.

Walmart's shares are up, with the retailer posting a more than 2 percent jump in value on Tuesday after rising steadily for the past six months

Walmart’s shares are up, with the retailer posting a more than 2 percent jump in value on Tuesday after rising steadily for the past six months

Dollar General has seen similar success, with its stock up nearly 4 percent

Dollar General has seen similar success, with its stock up nearly 4 percent

While Dollar General said it has also attracted wealthier customers, the chain's Ohio stores are under investigation for alleged price cuts in search of better deals

While Dollar General said it has also attracted wealthier customers, the chain’s Ohio stores are under investigation for alleged price cuts in search of better deals

The consumer price index rose 7.7 percent year-on-year in October, marking the fourth straight month of decline from a 40-year high of 9.1 percent hit in June.

The final demand producer price index, which measures inflation before it reaches consumers, rose just 8 percent year-on-year in October, also marking a fourth straight month of decline in the figure, the Labor Department said on Tuesday.

Core inflation excluding volatile food and energy prices fell to 6.3 percent on an annualized basis after hitting a four-decade high of 6.6 percent in September.

The numbers were all lower than economists expected and Wall Street has responded positively, with all three major indices rising since the report.

The producer price index for final demand, which measures inflation before it reaches consumers, rose 8% yoy in October, falling for the fourth straight month

The producer price index for final demand, which measures inflation before it reaches consumers, rose 8% yoy in October, falling for the fourth straight month

The Dow rose again on Tuesday, adding to the recent rally seen in a five-day view

The Dow rose again on Tuesday, adding to the recent rally seen in a five-day view

However, as spending shifts back to labor-intensive services and the labor market is still tight, wage pressures could keep inflation painfully high for some time.

The Fed delivered a fourth straight 75 basis point hike in interest rates earlier this month, saying its fight to bring inflation down to the Federal Reserve’s 2 percent target would require a further rise in borrowing costs.

However, the Fed has signaled that it may be nearing a turning point in its fastest rate hike cycle since the 1980s.

Traders are now pricing in a 91 percent chance of a 50 basis point rate hike at the Fed’s December meeting.

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