Philly consumers are still spending, but aren’t splurging the way they used to

Steven Brown is seeing fewer impulse buys these days. The co-owner of the Modern Republic furniture store in North Philadelphia says consumers have gotten less spontaneous over the last year.

“People are just more laser-focused between their wants and needs” he added, with customers saying things “like ‘I may want this, but I need this right now.”

Local business owners in different parts of the city echoed Brown’s assessment of how consumers are spending these days: Even amid rising uncertainty about personal finances and the broad economy, Philadelphians are still shopping — but they’re not splurging.

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Their business has been steady since the holidays, they said, mirroring larger trends. Retail sales increased nationwide last month. However, at least in the Philly region, people aren’t buying more than they need, store owners and managers said.

“People that do actually have money are spending it,” said Dorothea Gamble, co-owner of Trunc, a Northern Liberties boutique. Yet she described recent customers as “very conscious” of what they are spending their money on.

“Instead of buying several pieces, they’re buying one,” Gamble said. “Instead of buying a set of whiskey glasses, they’re buying one.”

In recent weeks, national reports on consumer behavior have painted varied, and at times conflicting, pictures about how consumers are feeling.

In the end of January, a Wall Street Journal headline read that “The U.S. consumer is starting to freak out,” noting three out of four recent months of falling retail sales and the widespread depletion of pandemic savings accounts.

But then last week, the Commerce Department released its January report, which showed that retail spending rose 3% from December, the largest increase in nearly two years. Sales jumped in all categories, except gasoline, as unemployment remained low and retirees last month received the largest cost-of-living adjustment to Social Security benefits in decades.

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Marco Airaudo, an economics professor at Drexel University’s LeBow College of Business, understands how consumers could be confused by the recent spending data — but he cautions that the data are not adjusted for inflation, and may not be indicative of any long-term trends.

People are likely continuing to spend due to personal habits, he said, which may be even more “myopic and less fully informed” due to the unprecedented nature of recent times. In the early days of COVID-19, people were forced to stay in, and as a result, many saved money.

Now, “people are depleting, probably too much and too quickly, some of the savings they made during the pandemic,” Airaudo said.

Some spending habits differ by neighborhood and the socioeconomic status of a store’s customers.

Klein’s Supermarket in Fairmount, where the median home price has risen in the last year to $440,000, increased its inventory of organic and gourmet products. The demand for those items has remained strong despite increased prices, said manager Andrew Klein.

Selling particularly well recently, he said, were six-packs of local pasture-raised, non-GMO soy eggs for $4.

“I think people are continuing to spend the same amount, if not more, on groceries and cutting back elsewhere,” Klein said.

He has seen an influx of new, younger customers coming into the store, he added, and the average price per trip has risen significantly, meaning that inflation has not yet driven customers there to buy fewer items.

Though he sees signs, too, albeit subtle ones, of people being increasingly intentional about their purchases in recent months. Klein’s meat and seafood prices have risen the most in recent months, he said, and the sales in those departments have decreased.

The signs of tighter budgets are more apparent at Cousin’s Fresh Markets.

Cousin’s has three stores in West and Southwest Philadelphia, where the median home price is $170,000 and $140,000, respectively, and another location in Chester, where the median home price is $80,000, according to Redfin.

“People are not spending their money like before,” said Sayed Ahmad, whose family owns the market chain. “They will go only for the stuff they need.”

That means more parents turning down requests of children they bring along for shopping trips, fewer purchases of snack items, and decreased sales of healthier but often more-expensive items, he said.

Before the holiday season, the markets used to average 100 customers a day, Ahmad said; that is now down to about 65. And he said those customers are also spending more than half as much as they once did: The average bill for a family’s monthly grocery trip to Cousin’s has decreased to $200, down from $400 or $500 as recently as the fall.

“It is really hard,” he said. “A big challenge.”

The economic future remains unclear, with experts cautioning not to put too much stock in one month of national spending data.

Economists and investors are watching to see whether the Federal Reserve will continue to raise interest rates to cool inflation, and whether that could spark a recession.

“Consumption spending is the biggest driver of the economy,” said Airaudo, the Drexel economics professor. “But at the same time, I think we need to be really careful.”

For individual consumers, he said, “spending too much today is probably not a very wise decision.”