The world’s central banks raced at an extraordinary pace over the past year to cool inflation, but it hasn’t proved enough—yet.

Economic growth remains mostly solid and price pressures strong across affluent countries despite sharply higher interest rates.

Why haven’t growth and inflation slowed more? Much of the explanation lies in the pandemic’s weird effects and the time it takes for central-bank rate increases to curb economic activity. Additionally, historically tight labor markets have fuelled wage gains and consumer spending.

First, the unusual nature of the pandemic-induced 2020 recession and the ensuing recovery blunted the normal impacts of rate hikes. In 2020 and 2021, the U.S. and other governments provided trillions of dollars in financial assistance to households that were also saving money as the pandemic interrupted normal spending patterns. Meanwhile, central banks’ rock-bottom interest rates allowed companies and consumers to lock in low borrowing costs.

Households and businesses continued to spend heavily in recent months. Families tapped their savings, which were replenished by solid income growth. Businesses kept hiring thanks to pandemic-related labour shortages and large profits.

“There are just a lot of embedded pandemic-era forces that are working against this tightening,” Tom Barkin, president of the Federal Reserve Bank of Richmond, told reporters last week.

Two industries traditionally sensitive to interest rates—autos and construction—offer examples.

Pandemic-related shortages of semiconductor chips limited the supply of cars for sale, leading eager buyers to pay higher prices for the vehicles available. Although U.S. construction of single-family homes tumbled last year, construction employment grew over the past 12 months. Fuelling job growth were supply-chain bottlenecks that extended the time needed to finish homes and a record amount of U.S. apartment construction, which takes longer to complete.

U.S. single-family housing construction has rebounded recently thanks to historically low numbers of homes for sale. Many households refinanced during the pandemic and locked in low mortgage rates—a good reason to stay put. “I didn’t fully anticipate how much the move in interest rates would convince people not to put their houses on the market,” Barkin said.

Normally, the Federal Reserve’s rate increases force heavily indebted consumers and businesses to rein in spending because they have to pay more to service their loans. But consumers haven’t overextended themselves with debt over the past two years; household debt service payments accounted for 9.6% of disposable personal income during the first quarter, below the lowest levels recorded between 1980 and the onset of the pandemic in March 2020.

“A lot of the imbalances you might anticipate at this point in the cycle just have not had the time to build up,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

Second, government spending has continued to bolster growth, cushioning economic shocks that proved less catastrophic than expected. While Europe’s energy crisis helped to tip the region into a shallow recession over the winter, the region skirted the deep downturn that some analysts had forecast. European governments pledged up to $850 billion to support spending.

This year falling oil and natural-gas prices have pumped up economic growth by putting money into consumers’ pockets, boosting confidence and easing pressures on government budgets. The price of a barrel of oil has fallen by nearly half in the past year, from around $120 to less than $70—below its level before Russia’s 2022 invasion of Ukraine sent prices soaring.

The reopening of China’s economy supported activity in the country’s many trading partners, while weak domestic growth prompted Beijing this month to provide new stimulus.

In the U.S., fiscal policy has provided more oomph for the economy this year. Federal funding continues to flow from President Biden’s roughly $1 trillion infrastructure package approved in 2021 and two pieces of legislation signed last year that provide hundreds of billions of dollars to boost renewable-energy production and semiconductor manufacturing.

A rock waiting to drop

Third, it takes time for higher interest rates to ripple through the economy and cool growth and inflation. The Bank of England first raised interest rates from near zero in December 2021, while the Fed and the European Central Bank lifted off in March 2022 and July 2022, respectively.

By some estimates, the first two-thirds of the Fed’s rate increases only restored rates to a level that was no longer pushing on the gas pedal, while the last third slowed the economy by pressing the brakes. The upshot is that policy has restricted growth for just eight or nine months, Atlanta Fed President Raphael Bostic wrote in an essay published last week.

Chicago Fed President Austan Goolsbee compared the potential coming impact of the Fed’s 5 percentage points in rate increases to the unseen hazards faced by Wile E. Coyote, the unlucky cartoon character. “If you raise 500 basis points in one year, is there a huge rock that’s just floating overhead…that’s going to drop on us?” he said in a recent interview.

Dario Perkins, managing director at the research firm TS Lombard, said higher rates are slowing growth in ways that aren’t obvious, such as by causing employers to cut unfilled jobs or companies to forgo expansion. “It might appear that monetary policy isn’t working when, in fact, it is,” he wrote in a recent report.

Climbing the last mile

To be sure, some central banks might not have done enough to cool demand. The ECB, for example, increased its key rate to 3.5% this month, but it is still negative when adjusted for inflation—potentially a stimulative level.

Many economists still anticipate a recession over the next six to 18 months, either because of past rate increases or those to come.

Just how much higher to raise rates is hard to judge because of mixed signals about economic activity. In the U.S., hiring has been strong, but average hours worked declined in May and the number of people filing for state unemployment benefits has climbed in recent weeks to its highest levels since late 2021.

Falling energy and grocery prices helped lower U.S. inflation to 4% in May from a four-decade high last summer of around 9%, according to the Labor Department’s consumer-price index. The breadth of price increases has narrowed. In May, less than 50% of all prices in the CPI rose by more than 5%, down from 80% of the index at one point last year.

Central bankers remain anxious, however, because measures of so-called core inflation, which exclude volatile food and energy prices, have declined much less. Those readings tend to better predict future inflation.

Central banks in Norway and the U.K. announced half-point interest-rate increases last week to address persistent inflation. Central banks in Canada and Australia recently resumed rate increases after pausing, pointing to higher service-sector inflation and tight labor markets.

The Switzerland-based Bank for International Settlements, a consortium of central banks, warned in a report released Sunday that reducing inflation to many central banks’ 2% target could be harder than expected.

Easy gains from lower energy- and food-price inflation have been banked. The longer high inflation lasts, the more likely it is that people will adjust their behaviour and reinforce it, the BIS said. In that scenario, central banks might find they need to cause a sharper downturn to force inflation down to their goal.

“The ‘last mile’ may pose the biggest challenge,” the BIS said.

SINGAPORE—Sinking global trade is pummelling Asian exports, bringing some relief on inflation to U.S. and other Western consumers.

But easing prices for home furnishings, electronics and other manufactured goods don’t signal high inflation will soon be defeated. Wage growth and services price gains are still elevated. And central banks in the U.S. and Europe are warning they aren’t finished raising interest rates in their fight to cool inflation.

Cheap Asian goods helped keep a lid on price growth for decades before the pandemic. Economists say that phenomenon is unlikely to return with the same intensity now that the high-water mark of globalisation has passed.

Asia’s powerhouse exporters enjoyed a boom in overseas sales during the pandemic as locked-down consumers splurged on new computers, workout gear and home improvements.

On a rolling 12-month basis, the U.S. dollar value of exports from China, Japan, South Korea, Taiwan and Singapore peaked last year in September at $6.1 trillion. That was 40% higher than recorded over the 12 months through March 2020, when the pandemic began, according to a Wall Street Journal analysis of official figures compiled by data provider CEIC.

Asian exports started sliding late last year as rising interest rates took some heat out of economic growth. Western consumers have slowed spending on goods in favour of eating out, traveling and other services they missed during the pandemic. Hopes that China’s reopening would spur a rebound in trade have fizzled along with the country’s consumer-led recovery.

Exports from South Korea over the 12 months through May were 11% lower than they were in the year through September. Taiwan exports were down 14% over the same period. Singapore’s were down 6%, Japan’s 4% and China’s by 3%.

The weakness in trade is showing up in the prices charged for goods when they leave Asia’s factories. Chinese producer prices fell 4.6% in May compared with a year earlier, the eighth straight month of declining supplier prices in the world’s largest factory floor. Similar gauges of inflation in other Asian exporter economies are weakening, too, as lower commodity prices reduce costs and collapsing demand for goods saps companies’ pricing power.

The effects of cooling Asia trade are starting to be felt in the U.S., where the Federal Reserve signalled it expects to further increase interest rates after holding them steady this month.

U.S. import prices for goods from Hong Kong, Singapore, Taiwan and South Korea were down 6.3% in May compared with a year earlier, according to the Labor Department. Import prices were down 2% from China and 3.7% from the Association of Southeast Asian Nations, a 10-member group that includes Indonesia, Malaysia and Thailand.

The prices paid by importers don’t quite line up with the prices faced by consumers, as companies need to cover labor, shipping and other costs to get products into stores.

Nonetheless, prices declined in May from a year earlier for a variety of goods in the U.S. that are often sourced from Asia, including furniture, home appliances, televisions, sports equipment, computers and smartphones.

Overall U.S. inflation is proving resilient, though. The consumer-price index, which measures what Americans pay for goods and services, rose 4% in May from a year earlier—twice the Fed’s 2% goal. Core consumer prices, which exclude food and energy, climbed 5.3%.

If surging prices for goods during the pandemic delivered the first burst of inflation, and rocketing energy prices after Russia invaded Ukraine propelled the second, then the current stickiness of inflation is being fuelled by increases in wages and the price of services. So while easing goods-price inflation is welcome, it doesn’t mean central banks have won the battle, economists say.

“The disinflation impulse coming from Asia is not going to be the magic bullet for the West’s inflation problem,” said Frederic Neumann, chief Asia economist at HSBC in Hong Kong, referring to the slowing pace of price increases.

In the decades before the pandemic, the integration of China into the global economy contributed to a long spell of low and stable inflation enjoyed by many Western economies. The broader integration of markets for goods, services, labor and capital under the banner of globalisation meant cheaper goods for consumers and fewer inflation worries for central banks, though economists debate just how big the effects were.

Now, governments and corporations are tiptoeing away from unfettered globalisation in the interests of security and economic resilience. Manufacturers are adding factories in Vietnam or India while reducing their reliance on China, reflecting concern over icy relations between the U.S.-led West and Beijing. Governments are dangling subsidies in strategic industries such as semiconductors and green-technology products to bring investment and jobs home.

Such trade fractures can increase costs for manufacturers, which, alongside healthier global demand, suggests that inflation in the future won’t be as subdued as it was in the recent past, economists say.

That doesn’t mean globalisation is over or that Asia won’t remain a competitive place to manufacture. But it does mean Asia is unlikely to be as potent a force in tempering price gains as it once was.

“The golden era of globalisation—and the disinflationary pressure associated with that—I think that has gone,” said Neil Shearing, group chief economist at Capital Economics in London.

Over the past few years, as the Manhattan real-estate broker Lisa Lippman took her well-heeled clients through $7 million-plus apartments with Central Park views and amenities including squash courts and lap pools, she noticed a change: It was no longer bankers making a lot of the offers. It was lawyers.

“It used to be you’d say someone is an investment banker, and that was a big deal. Now it’s like meh,” Lippman, a former lawyer, said. “If I had to pick my favourite buyers, it would be big-time lawyers.”

While bankers used to make multiples of what lawyers did, the lawyers have been zooming ahead, thanks to stagnant banker pay for all but the very top performers and changing dynamics at law firms. The trend took hold well before the recent slowdown in deal making dented banker pay.

The Wall Street Journal spoke to more than 30 compensation experts, bankers and lawyers and reviewed pay data over more than 15 years.

Managing directors who aren’t in high-ranking leadership roles at banks make an average of between $1 million and $2 million most years, including bonuses often paid largely in stock, more or less unchanged from where it was two decades ago.

Equity partners at top law firms, meanwhile, can make around $3 million or more a year—more than triple what they were pulling in two decades ago. An elite group of partners who bring in exceptional amounts of business are earning north of $15 million at a handful of firms including Wachtell, Lipton, Rosen & Katz; Kirkland & Ellis; and Paul, Weiss, Rifkind, Wharton & Garrison.

“Things have changed,” said Mark Rosen, a longtime legal recruiter. “Lawyer compensation has grown unbelievably.”

In 2000, when Rob Kindler, an established deals lawyer, left the white-shoe law firm Cravath, Swaine & Moore to get into banking, a Journal story said he could make around five times as much money at an investment bank.

Earlier this month Kindler, 69, left Morgan Stanley to join the law firm Paul Weiss. There, he stands to make upward of $10 million a year, depending on performance, likely more than he was earning at Morgan Stanley.

Lawyers and bankers are the linchpins of Wall Street, working in tandem to facilitate all manner of maneuvers for the world’s biggest companies. Specialists in both professions help clients raise money, do deals and ward off unwanted suitors or investors.

The reasons for the shifting fortunes between the two groups are varied. No longer relegated to simply marking up contracts, today’s corporate lawyers are quasibankers, serving as sounding boards for corporate executives as they clash with regulators or wrestle with thorny issues such as succession planning. They have also received an outsize amount of work from the rise of private equity, a client base that was nowhere near as active 20 years ago.

At the same time, the law-firm industry’s compensation structure has been upended, as all but a few of the largest firms abandon the so-called lockstep pay structure in which partner payouts are solely based on seniority, rather than productivity. That has created a new era of bidding wars for talent, akin to sports teams stretching their wallets to sign star players.

Kirkland, in particular, put competition in overdrive over the past 15 years as it poached partners from other firms to jump-start its business. Kirkland has offered potential recruits deals that could be worth $20 million or more annually for the first few years, significantly more than most could make elsewhere.

Most big law firms raise their prices by around 4% each year, usually more than topping inflation, according to Owen Burman, a Wells Fargo senior consultant who tracks the industry. Banker deal fees, while large, are relatively static. Top lawyers currently charge more than $2,000 an hour for their time.

Some high performers at top firms earn more than $15 million, and an elite few get well over $20 million. Paul Weiss’s Scott Barshay and Kirkland’s James Sprayregen are often singled out as among the highest-paid lawyers on Wall Street. (JPMorgan Chase Chief Executive Jamie Dimon, by comparison, made $34.5 million last year, with most of it paid in company stock.)

While standout law firm partners might bring in around $20 million in annual revenue, superstars can bring in $100 million or more, said Rosen, the legal recruiter.

The riches can come at a price. Advising companies at their most critical moments means the work is 24/7. Rosen said it isn’t uncommon for his clients to work 18-hour days, on weekends. One lawyer recalled being on a client call while posing for family photos at his son’s bar mitzvah.

Bankers’ work can be similarly nonstop, but compensation for most hasn’t continued the trajectory it was on before the 2008 financial crisis, according to survey data from the recruiting firm Bay Street Advisors.

Bay Street’s analysis shows that the average managing director at a top-20 investment bank not leading a group made $1.9 million a year over the past three years (which included a standout 2021), compared with $1.9 million in 2007. And that is without accounting for inflation. Lower-level bankers are making even less on average than they were precrisis.

Pressure from regulators, increasing expenses and a move toward selling big banks’ brand names rather than individuals have all hurt pay. While it was typical before the financial crisis for so-called bulge-bracket banks such as Goldman Sachs Group and Morgan Stanley to spend well over 40% of revenue on pay, that figure is now much lower.

“Every time the banks get wind in their sails, we hit a hiccup and get set back a few years again,” said Kevin Mahoney, a senior partner at Bay Street who runs its investment-banking practice.

It used to be common for bankers to retire in their 50s, having amassed sizable fortunes. That is less often seen now.

But don’t start shedding tears for them just yet. Their pay still dwarfs the median U.S. household income of around $70,000 a year. And star bankers—especially at independent advisory firms such as Centerview Partners—can still haul in a healthy eight-figure payday or more in a good year.

Dana Cimilluca and Alexander Saeedy contributed to this article.

Does background music encourage customers to buy more goods? Perhaps, but it depends on what day it is.

In a study based on three supermarkets in Sweden, researchers showed that background music did boost customer spending—but only Monday through Thursday.

The researchers looked at three supermarkets in Stockholm serving in total about 150,000 customers over three weeks, during which the stores switched between playing popular songs or elevator music in the background, or playing no music at all.

The type of music didn’t make a difference on purchases. But Monday through Thursday, music encouraged customers to spend more. In a follow-up experiment, the authors found that in one of those stores on weekdays, customers spent an average $23.31 per person for each excursion, compared with $14.96 when no music was playing.

On the weekends, however, the difference between having background music and no music wasn’t statistically significant.

Depleted customers

What explains the differences in shoppers’ behavior?

“On the weekdays, people tend to be more mentally and physically depleted,” says co-author Carl-Philip Ahlbom, a senior lecturer at the University of Bath’s School of Management in England. In such a state, he explains, shoppers tend to use intuitive processing, rather than active reasoning, making them more receptive to the relaxing effects of music. The music causes them to linger longer in the store, look more, and ultimately buy more items, he says.

To further test how music might affect the shopping experience, Ahlbom and his colleagues asked 600 people in the U.S. to imagine several activities that happen either on the weekend or weekday and how they felt during this activity. Then the participants were asked to specifically think about grocery shopping either on a weekday or weekend. Participants were shown an image of a shopping cart and then asked to select any item they would like to purchase from a list of 24 items. While selecting items, one-half of the participants heard music and one-half did not.

Effects of music

Afterward, the authors asked participants to rate, on a scale of one to seven, with one being “do not agree at all” and seven being “completely agree,” if they felt mentally tired, mentally worn out, stressed, anxious, happy, satisfied and excited. With seven reflecting the more positive feelings, participants who heard music on the weekdays scored 4.31 while participants who heard no music on the weekdays scored 3.96.

That is a statistically significant difference of 8.8%, says Ahlbom. There was no significant statistical difference for the two participant groups—those hearing and those not hearing music—while shopping on the weekends.

The idea, says Ahlbom, is that music makes people feel better when they are depleted and often encourages them to continue shopping. But when people are already relaxed, as they tend to be on the weekend, music has much less of an effect. “They don’t need to take the mental shortcut.”

With Brazil struggling in its efforts to create a regulated carbon market, the country’s new president is moving to scrap his predecessor’s approach and start anew. But success is still far from guaranteed.

The administration of President Luiz Inácio Lula da Silva is putting the finishing touches on a proposal laying the groundwork for a new, regulated cap-and-trade system, which he is expected to send to Congress later this month. The approach is starkly different from that of his right-wing predecessor Jair Bolsonaro, who last year issued a decree relying on the private sector to establish the basis for a carbon market, which never happened.

In either case, the system would set emission caps for certain industries and allow some companies to temporarily offset their excess pollution by buying allowances from those that cut more emissions than required. One credit would amount to one metric ton of carbon dioxide either removed from or prevented from being emitted into the atmosphere. Over time, the cap would be lowered to reduce emissions.

Financing carbon-capture projects such as reforestation could also generate carbon credits. Proponents say it is a way to protect the Amazon rainforest and other biomes, an approach that could also become an income stream to millions of impoverished residents currently making money off deforestation.

Yet despite broad support from exporters, who deem a regulated carbon market necessary to maintain key consumer markets overseas and attract investment, the initiative faces significant political hurdles at home and may not be enough to tackle the deforestation that is responsible for nearly half of the nation’s carbon footprint.

Brazil prides itself on getting nearly half of its energy and almost all of its electricity from renewable sources. It also already has an active market in voluntary carbon credits, where corporations buy credits from certified environmental projects to offset their emissions to meet self-imposed targets. But all that may still not be enough in a world increasingly worried about climate change.

“There is a global green arms race. Do we want to just sit on our achievements and watch while the tortoise outruns us?” said Gustavo Pinheiro, coordinator of the low-carbon economy portfolio at the nonprofit Institute for Climate and Society. “We need to price rising emissions,” he said, “and a regulated market is the least traumatic way to do it.”

As home to nearly 60% of the Amazon rainforest, Brazil is crucial to slowing global warming. Brazil was responsible for about 1.3% of global carbon-dioxide emissions in 2021, according to European Union data, and its population, economy and footprint are expected to grow, pushing the country further away from its commitments in the 2015 Paris global climate agreement and underscoring the need for a regulated carbon market. A cap-and-trade system could also beef up the country’s troubled economy, as global trade increasingly requires cleaner supply chains, some experts say.

“Having a regulated carbon market would be good for the overall economy, [and] would put our corporations in a better position to compete,” said Luiz Gustavo Bezerra, a partner at law firm Tauil & Chequer, which is associated with Mayer Brown.

Local exporters say they could benefit from regulation compatible with rules already in place in key overseas markets, which increasingly demand low-carbon supply chains. For example, a local regulated carbon market could help exporters avoid the carbon border adjustment mechanism the EU plans to charge on some imported products from 2026.

Brazil is one of the largest exporters of iron used to make steel for a range of things, such as home appliances, vehicles and wind turbines. Iron-ore exporter Vale, which aims to have net-zero emissions by 2050 and uses an internal price of $50 per metric ton for its greenhouse-gas emissions, said in emailed answers that initiatives to price carbon are “important for the competitiveness of Brazilian industry.”

The nation is also a major global supplier of soybeans, corn and beef, products often associated with deforestation. Farming group Roncador, a producer of grains and beef, said it is worried about increasing global restrictions to products lacking environmental certificates.

“Since Brazil still doesn’t have a regulated [carbon] market, we are developing our own research and have developed our own protocol to ensure our activities have a positive impact on the environment,” the group’s Chief Executive Pelerson Penido Dalla Vecchia said.

Exporters also hope a regulated market would help repair Brazil’s abysmal environmental reputation, a product of its history of deforestation. “We have great expectations that the government will better regulate carbon markets,” said Antônio Queiroz, vice president of innovation, technology and sustainable development at Braskem, one of the world’s largest petrochemical companies.

A regulated market could also help lure green-economy investments, according to lawyer Bezerra: “We are always approached by private-equity firms looking for areas in Brazil to invest in reforestation or forest preservation.”

The country could earn up to $120 billion through 2030 on carbon credits, assuming an “optimistic scenario” of $100 a metric ton of carbon, according to a study by the Brazilian division of the International Chamber of Commerce and local carbon consulting firm WayCarbon. While that price is multiples of current voluntary market credits—lately valued at about $1—the EU credits have recently been trading around €82 a metric ton, equivalent to $88, according to OPIS.

Brazil has a goal of reforesting an area bigger than Pennsylvania, said Ana Toni, head of the National Secretariat for Climate Change: “How many countries have that?”

But carbon-capture projects based on forest preservation are typically traded in the so-called voluntary markets, often not covered by government regulation. Many have come under scrutiny recently after failing to fulfil their promises. For example, a Wall Street Journal investigation into a reforestation project in Peru found little of the money designated for rainforest preservation actually reached locals.

Despite these and other problems that bedevil this form of credit, Brazil’s Ministry of Development, Industry, Trade and Services said its proposal will allow credits from the voluntary market to be used, to a certain extent, in the new regulated one.

The da Silva administration plans to have a carbon market operating in a couple of years, Toni said. But da Silva lacks a majority in Congress, and in any case is expected to give priority to major fiscal and tax legislation ahead of the carbon-market bill.

And in a sign of the difficulties ahead, lawmakers recently passed legislation to weaken the Environmental Ministry led by sustainability advocate Marina Silva, who is backing the effort to create a regulated carbon market.

Annie Groth, head of advocacy and policy at Biofílica Ambipar Environment, a developer of carbon projects in the Amazon and other biomes, said there is hope that carbon legislation could be approved before the United Nations Climate Change Conference in Dubai beginning Nov. 30.

But she cautioned, “It’s the most optimistic scenario.”

That Mercedes in the dollar-store parking lot isn’t an illusion.

High-earners joined the rest of the country in flooding discount retailers such as Dollar General, Aldi grocery store and Five Below as prices for food and staples rose. Now, with inflation at half its peak, they aren’t letting up.

InMarket, which tracks retailer foot traffic, measured a 4% average increase in the share of dollar-store visits this year among those making more than $100,000, compared with the second half of 2022. Households with six-figure incomes are 15% more likely to say they would shop at dollar stores than they were last June, going from 39% to 45%, according to daily surveys from Morning Consult of about 50,000 Americans.

Wealthy Americans long viewed discount stores as “not for them,” says Michael Liersch, who consults with high-net-worth individuals as head of advice and planning at Wells Fargo. Yet paying $8 for a carton of eggs struck even many affluent people as ridiculous.

Overspending on things was once fashionable for some, Liersch says. “These days, it’s about making the most of your money and not getting ripped off.”

No matter how much you make, consumers say, there is no longer a stigma in going after a good deal.

Cheap kombucha

Autry Liggett, who works in operations for a Santa Barbara, Calif., hedge fund, exclusively shopped at Whole Foods and other high-end chains for groceries and household goods until recently. Growing up, he says he looked down on what he saw as poor-quality products at discount retailers.

Then, one of his friends brought over a case of 99-cent-store kombucha and probiotic drinks a few months ago. “She makes good money, so I just assumed she also shopped at Whole Foods and the other places I shop,” he says. “I was shocked.”

He now pops into the 99 Cents Only store downtown at least once a week, making sure to visit on Tuesday or Thursday, when they restock, for the best selection. He recently bought vitamins that retail at Whole Foods for $25 for $1.99, and a pint of organic blueberries for 99 cents.

A Dollar General spokeswoman says the brand has attracted and retained higher-income customers lately. A recently updated fresh-produce section, now available in nearly 3,900 stores, might be bringing more customers in.

Plenty of wealthy people point out that they got that way partly by not overspending on the small stuff—especially when it is all the same stuff.

“A carrot is a carrot is a carrot,” says Morgan Pierce, who earns about $200,000 a year working at McDonald’s Chicago corporate office. She frequently hits up Aldi and her local dollar store for groceries and other staples. Her last birthday party featured a private chef—and $1 plates and decorations.

Pierce, who was quick to tell her guests where many of the party supplies came from, says people were impressed. It is a shift from how she felt as a child, when she questioned why her family always had to hunt for sales. Now, she says she realises her mom has always been a bargain hound.

“Not everything on the shelves is well-made, but there are things that are, and I am not ashamed to go into those places and get them, and I’m not afraid to tell people about it,” Pierce says.

Bob Gillman, an executive transition consultant, has shopped at Aldi and other discount chains for decades. He didn’t mention the habit to his friends until recently, when a branch popped up near his tony Palm Springs, Calif., community.

“We see lots of people driving Porsches, Mercedes and BMWs in the parking lot,” Gillman says. “No matter how much you make, you don’t want to spend $4 on an avocado when you can get one for 59 cents.”

Few seem to mind feeding a quarter to check out a shopping cart, or bagging their own groceries, Gillman says.

Gillman’s daughter, Rachel Gillman Rischall, often rolled her eyes at her dad’s zealous discount shopping. That is, until this past year, when her grocery bills soared, and birthday-party gifts for her kids’ friends topped $50 a pop near her Chicago home. Fed up, she checked out the toy selection at Five Below and hasn’t looked back. She also now buys journals, art supplies, stationery and snacks there.

“My dad is so proud,” she says.

Shopping at dollar stores is a choice for some, yet it is a necessity for many, and Americans increasingly get their groceries from these retailers.

Expanding into more-prosperous areas is part of Aldi’s strategy, analysts say. The retailer plans to add 120 new U.S. stores in 2023, after opening and remodelling 139 stores last year. The brand says it attracted 9.4 million new U.S. customers in 2022.

Budget influence

Social media is also helping make dollar and discount stores cool. Videos tagged #dollartree have a combined 7.6 billion views on TikTok. Many feature influencers trying out what are known as dupes of popular high-end beauty products and other goods.

Entrepreneur Bethenny Frankel says her discount and drugstore hauls have attracted more attention than anything she did when she was featured on the reality show “The Real Housewives of New York City.”

“I go in there with my Hermès bag,” says Frankel, whose YouTube and TikTok videos shopping at dollar stores and unboxing ultra cheap products regularly ring up millions of views. She says she isn’t paid by any of the discount chains for her videos.

While some viewers have accused her of pretending to like and use a $1 lip gloss or storage bin when she could easily afford its more expensive counterpart, Frankel says her enthusiasm is genuine.

“What’s the difference between a dollar-store and a $20 pair of flip flops? Is there such a thing as truffle-oil-infused rubber?” she says. Lip gloss, meanwhile, “stays on for five minutes no matter how much you spend.”