Inflation cutting buying power but consumers press on

Cumberland Farms on High Bridge Road in Rotterdam Thursday, June 23, 2022.
PHOTOGRAPHER:

Cumberland Farms on High Bridge Road in Rotterdam Thursday, June 23, 2022.

People are sometimes spending differently as inflation bites into the value of their dollars.

But sales tax collections this year are up sharply over 2021, suggesting New Yorkers aren’t cutting back on their spending — yet.

The Consumer Price Index jumped 8.6% from May 2021 to May 2022, the biggest one-year jump since December 1981 and far more than most people will gain by way of raises in their paychecks this year. Some of the biggest price increases have been in food and energy — two things almost nobody can do without.

The Daily Gazette asked a handful of merchants large and small what they’re seeing in their customers’ spending habits.

“People are getting sticker shock on what things are costing,” said Andrew Crounse, owner of Glenville Beverage. 

They’re not buying less or buying cheaper, though he expects one or the other to happen eventually if inflation doesn’t moderate.

Clouding the equation: The weather has been great, and beer sales jump on a nice weekend.

“It’s kind of hard to say at this point how much the economy is affecting it,” Crounse said. “I’m flat. I’m not down.”

Price Chopper/Market 32 President Blaine Bringhurst said this period of inflation is the worst he’s seen in his 40 years in the supermarket industry, and it’s a different inflation, with supply-chain limitations forcing changes in strategy for grocers stocking shelves and shoppers picking items off those shelves.

One example among many: General Mills stopped packing Cheerios in 10-ounce boxes. So that particular breakfast staple is automatically more expensive — even if the bigger size is cheaper per ounce, just putting the box on the table is a bigger buy-in, which isn’t easy for everyone.

“Many of our customers are on a fixed income and only have so much money to spend,” Bringhurst said.

That’s a widespread pandemic-era trend in supermarkets, actually: Larger, more expensive units are favored over smaller units, resulting in an overall decrease in the number of units sold, he said.

The Schenectady-based supermarket chain has taken a number of steps to help shoppers deal with the price increases, including a renewed emphasis on its Advantage loyalty card and more everyday low pricing to supplement the promotional weekly specials it has used heavily over the years.

Then there’s the house brand.

“Price Chopper for years has worked to get our own brand in the forefront,” Bringhurst said. “They’re more expensive than they were two years ago as well, but they’re significantly less expensive than national brands.”

MORE MONEY

Some of these increases bear an expensive legacy: The average interest rate for a 30-year fixed rate mortgage jumped from 2.93% to 5.78% from May 2021 to May 2022, which boosts the cost of repaying a $250,000 loan from $376,000 to $527,000 over 360 months.

The houses on which those mortgages are lent also cost more: The Greater Capital Association of Realtors reports the median sale price for a one-family house in the Capital Region was $278,000 in May, up 10% from $252,000 a year earlier.

More price hikes are coming: Health insurers are seeking 16% to 18% rate increases for 2023.

Some increases are hard to see, avoid or predict: National Grid electric supply charges jumped 42% from December to January but slid 61% from January to June.

Things aren’t all bad, though: Sure, gasoline cost 60% more on the first day of summer this year than last, but it was down 0.8% from the all-time Capital Region record a week earlier.

It’s also worth noting that the Capital Region starts from a baseline as one of the more expensive places in America to live. The Virginia-based Council for Community and Economic Research, or C2ER, produces a cost of living index that compares 262 metropolitan areas on measures such as housing, groceries and transportation. Albany-Schenectady-Troy was No. 52 on the overall composite index.

Finally, while consumer spending as a whole is rising with inflation, not everyone has the wherewithal to grit their teeth and pay up. Many Americans — the majority, by some estimates — can’t cover an unexpected $1,000 expense.

BIG AND SMALL

Discount retailer Ocean State Job Lot has been growing for years with its blend of bargain-priced and closeout merchandise. It says it’s seeing increased interest now, especially in food, household necessities and seasonal summer items.

“The value we offer is always attractive to new and existing customers, and now more than ever, as everyone is trying to stretch their budgets,” said Paul Cox, director of store operations for the Rhode Island-based chain. 

Ocean State’s rewards program and its 50% Crazy Deal savings have been popular, he said. “With all the financial pressures our customers are experiencing we have seen an uptick in the purchase of these offers.”

At the other end of the economic spectrum is Alpin Haus, a retailer of recreational and lifestyle equipment including boats, RVs and pools.

Its business relies almost entirely on discretionary spending, which can tighten as an economy struggles.

“Overall, we’re having a very good year,” President Andy Heck said. “Demand is not as strong this year as it was the last couple of years, but more in line with prepandemic.”

He sees fewer impulse buys and fewer price-is-no-object customers, particularly for major purchases that require financing, which is a lot more expensive lately.

There’s more interest in pre-owned boats and RVs, and there’s a concern at Alpin Haus that steadily rising costs will put new units beyond the reach of many people.

But Heck says the market remains strong, even as the ability to buy into it wavers.

“Americans want a vacation so there’s still pent-up demand in that respect,” he said.

Stewart’s Shops, the modern-day general store in many neighborhoods, is paying more for everything — the ground coffee, the fuel to haul the coffee to its stores, the electricity to brew the coffee, the cups in which to sell the coffee, the salary of the cashier ringing it up. 

Stewart’s is also charging more.

Everybody, spokeswoman Erica Komoroske said, is feeling the pain.

“Our coffee cups have doubled in cost, butter is up nearly 40%, eggs are up, bacon is up, bread is up,” she said. “The costs have risen on every product we carry and we are doing our best to keep our prices low, but we have to pass some costs along to the customer. It is truly need, not greed. Our products continue to offer a great value as we are the town grocery store, diner and gas stop in many areas.”

To ease the pain at the register, Maine-based supermarket chain Hannaford continues to follow its everyday low price model, promotes its private-label goods as a less expensive alternative to national brands and targets its rewards program members with personalized discount offers.

Spokeswoman Caitlin Cortelyou said Hannaford offers free online guidance on how to shop on a budget.

“Customers have complimentary access to virtual classes offering wallet-friendly shopping tips and strategies for eating healthy on a budget, led by Hannaford’s registered dietitians,” she said.

KEEPING MOVING

Niskayuna entrepreneur Aneesa Waheed hasn’t seen any pullback by diners at her Tara Kitchen restaurants as inflation puts new demands on their budgets, and she’s not worried she will if inflation continues.

“My whole thought process in everything I do is I try not to fight things I cannot fight, I try to find solutions,” she said. “As a small business owner, everything that’s happening in the world immediately directly or indirectly affects the customer, ergo affects me.”

Tara Kitchen’s supply costs have skyrocketed, but it’s a conservatively run operation and is trying to weather the storm without making many customer-facing changes, Waheed said.

She’s moving ahead despite the churning economy. 

Her first cookbook, which will attempt to demystify the many-layered cuisine of Morocco, will come out June 28, and a new restaurant in New York City is targeted for a Nov. 1 opening.

Because it’s an experience as much as a meal, restaurant dining transcends inflation, Waheed firmly believes.

Curtis Lumber in Ballston operates in a sector more heavily impacted than most by the economic spasms of the past two years: building supplies. Marketing Director Jim Carpenter said his industry is still struggling with prices and shortages.

“We’re experiencing unprecedented increases from manufacturers. Lumber over the past couple of years has been one of the most volatile items,” he said, though adding that lumber prices finally have begun to drop. 

“That’s been a real positive,” he said. “Every other item has gone up and continues to go up, unfortunately.”

Curtis has tried to cushion the blow on its customers by making deliveries with small trucks where possible or by running its big trucks with fuller loads to more stops on fewer trips to save fuel and labor costs.

Also, it buys in bulk — a full year’s worth of Trex composite decking, for one example — so it can lock in prices for customers.

Advance indicators such as Google searches and web page clicks suggest the home improvement frenzy of the past two years might be slowing down, Carpenter said. Whether that’s due to inflation or the fact that so many people who wanted work done have had it completed, he doesn’t know.

There’s been a little downshifting on price points, with customers opting for a less expensive trim level or product line, but only a little. Typically, Carpenter said, if someone is able to secure the labor for their project, they don’t cut corners on the components.

“So we still are seeing strong sales.”

As for the future?

History provides a clue: Eventually all periods of high inflation have moderated, but actual deflation has been quite rare in the U.S. economy.

“We just had a healthy price increase right before the summer started and there’s rumors — more than rumors — there’s going to be another one in September,” said Crounse, owner of Glenville Beverage.

So at some point, customers who now buy pricey beers may pick mass-market brews instead. But they haven’t yet, he said.

Categories: Business, News, Schenectady, Schenectady County

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