After two years of rising costs, Americans are becoming more cautious with their spending, prompting retailers to offer more discounts. In response, Target are reducing prices on groceries, and fast food establishments are introducing lower cost meals. Discount stores like Dollar General are attracting budget-conscious customers. CEO Todd Vasos noted that Dollar General shoppers are making tradeoffs, buying fewer items despite the store attracting more middle- and upper-income customers.

This financial strain is reflected in broader data as well. The Federal Reserve’s “Beige Book” reports consumers resisting further price hikes. Target recently reduced prices on 1,500 items with plans for more cuts. This cautious spending contrasts with last year’s robust expenditure, which kept the economy growing. Revised figures show the economy grew at an annual rate of 1.3% in the first quarter, down from the initially reported 1.6%, due to reduced consumer spending.

The slowdown continued in April, with consumer spending on goods falling 0.2%, according to the Commerce Department. However, spending on services like haircuts and event tickets increased, contributing to persistent inflation. Consumer prices rose 2.7% in April from a year ago, still above the Federal Reserve’s 2% target.