On Tuesday (Sept. 17), we’ll find out if the July surge in consumer spending — as measured via unadjusted retail sales — has amounted to a blip or a trend.
The monthly data from the Department of Commerce (this time for August) will offer a snapshot of how consumers are grappling with inflation. We’ll see whether they are simply running in place or buying more goods, filling their in-store and online baskets in ways that should cheer merchants headed into the final few months of the year.
Last month, retail sales spiked 1% in July, where the consensus had been that there would be 0.4% growth, as measured month over month. Ten of 13 spending categories showed growth in that timeframe.
For August, the consensus holds that retail sales will be up 0.2%. It may be a low bar to hurdle.
But then again, there may be some pressure on at least some of the categories that saw some growth in July, especially dining out. Sales at eating and drinking establishments were up 0.3% in the last period, outpaced by spending at grocery stores, which gained 1%.
The Consumer Price Index, released last week, offered evidence of slowing inflation. Food consumed away from home was up to 0.3% as measured in August, up from July’s monthly 0.2% push higher. On an annualized basis, the measure was up 4%.
The cost of shelter was up 5.2% on an annualized basis, increasing from July. As measured on a month-over-month basis, the shelter index surged 0.5%, accelerating from the 0.4% pace seen month to month into July.
Because June was flat in terms of retail sales, July’s surge, and the anticipated August incremental increase in spending will point the way toward whether consumers will be inclined to keep spending into the all-important holiday shopping season.
PYMNTS Intelligence found that spending activity itself is uneven, as 32.5% of consumers said they reduced the quality of items they bought. More than 61% of consumers said they cut down on the number of items they bought or trimmed the tab in certain use cases.
Restaurant-related price increases were sticky. PYMNTS Intelligence found that coming into the summer, younger consumers pulled back a bit at eateries. Generation Z’s per-purchase spending dropped by 21% to $34. In the same period, Generation X’s average spending per restaurant purchase decreased from $42 to $36.
The July retail sales data also detailed that discretionary categories were under some pressure, as sporting goods and hobby-related item retailers saw sales tick down by 0.7% month over month, clothing stores were 0.1% lower month over month and miscellaneous store retailers saw sales drop by 2.5%.
The tradeoffs are evident, but what remains to be seen is where it may still be happening.
The August CPI data indicated that some of the most urgent expenditures are still becoming more expensive. As Ally Financial’s latest commentary and data underscored, consumers are falling behind on auto loans.
As for what lies ahead, Americans will slow their holiday spending this year compared to 2023. Last week’s holiday retail forecast from consulting firm Deloitte estimated that holiday retail sales for 2024 will increase between 2.3% and 3.3%, to $1.58 trillion to $1.59 trillion between November and January. The projected pace is lower than the 4.3% growth seen last year at that time.
