Discount and Upmarket Retailers Growing But Mainstream Getting Squeezed

The continued success of the discount retail sector in the US supports our view of a two speed recovery in the US economy. The economic downturn has had a particularly pronounced impact on lower and middle income consumers, with unemployment rising rapidly in traditional blue collar jobs such as construction and manufacturing (see first chart). These shoppers are choosing to trade down to competitively priced discount stores, such as Dollar General and Family Dollar, and this has hit sales at mainstream outlets such as Wal-Mart and Safeway.

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