Former Toys "R" Us CEO Gerald Storch warns that the upcoming holiday season will be very difficult for retailers due to persistent inflation, as consumers face rising prices, interest rates, credit card debt, and student loan burdens.
Inflation is causing a decline in affordability for average working individuals, with prices on everyday necessities such as groceries, gasoline, and housing rising significantly in the past two years due to government spending and the Fed's money-printing.
Consumer spending growth is slowing as the economy stabilizes, with consumers prioritizing essential purchases and adjusting their spending habits in response to rising interest rates and financial pressures.
Americans continued to spend on dining out despite concerns about recession and inflation, with retail sales at restaurants and bars increasing by 11.8% in July and 9.5% in June compared to the same period last year, according to the Commerce Department. The strong consumer spending in this sector is seen as a positive sign for the economy and has been reflected in the earnings growth of restaurant companies.
Despite overall solid consumer spending, retail earnings reports indicate a shift towards more cautious shopping habits, with lower-income shoppers feeling economic pressure and opting for essential items and discounts at off-price and discount retailers. Delinquencies on department store credit cards are rising, suggesting a stretched consumer, and retailers are bracing for the impact of the resumption of student loan payments on shoppers' budgets. The upcoming back-to-school season and Halloween will serve as indicators for the rest of the year and the holiday season.
US consumer spending is showing resilience and robust growth, although signs of a slowdown are emerging, potentially related to the public's perception of a deteriorating financial situation due to high inflation and rising interest rates, despite the fact that households still have higher deposits compared to pre-pandemic levels.
According to a survey by Jefferies, 50% of consumers in the US plan to spend more on back-to-school shopping this year, with 70% citing inflation as the primary reason for increased spending, particularly on apparel; Walmart's private label business is expected to benefit from this trend.
Consumer spending in China rebounded in August, with all categories, including apparel, automotive, food, furniture, appliances, and luxury, experiencing increased sales compared to July, according to a survey by the China Beige Book. Retail sales in July rose by 2.5% year-on-year, raising concerns about China's economic growth, but the August survey showed a surge in spending, particularly in the services sector, which saw continued strength in travel and hospitality. Additionally, corporate borrowing increased as the cost of capital declined, indicating a boost in business activity. However, China's property sector continued to worsen, with house prices barely growing and home sales declining.
More Americans are struggling to keep up with car loan and credit card payments, particularly lower-income earners, as higher prices and rising borrowing costs put pressure on household budgets, signaling potential consumer stress; the situation is expected to worsen as interest rates continue to rise and paused student loan payments resume.
Consumer spending in the US jumped 0.8% in July, the strongest monthly gain since January, driven by purchases of restaurants, live shows, toys, games, and recreational equipment; however, underlying data suggests that this spending may be on borrowed time.
Struggling U.S. families relying on credit card loans to cover living expenses may face a spending correction soon, as consumers continue to spend despite rising rates and living costs, leading to potential unsustainable debt levels and limited access to credit.
U.S. consumer spending increased in July, boosting the economy and reducing recession risks, but the pace is likely unsustainable as households dip into their savings and face potential challenges from student debt repayments and higher borrowing costs.
Concerns about a slowdown in consumer spending are present, but customers are still spending on technology and designer brands; however, if job levels cannot be maintained, there could be a corrective mode due to depleted savings.
Despite the cooling inflation rate, the cost of goods and services in the United States has significantly increased, making it more expensive for the majority of workers to live, which contributes to their unhappiness about the economy.
Consumer spending has remained resilient, preventing the US economy from entering a recession, and this trend will likely continue due to low household debt-to-income levels.
Consumer spending in the US is expected to decline in early 2024, marking the first quarterly decline since the start of the pandemic, according to a survey by Bloomberg. The pessimism is attributed to high borrowing costs and the depletion of COVID-era savings.
U.S. consumers have accumulated $43 billion in additional credit card debt during Q2 2022, three times the average amount since the Great Recession, and credit card interest rates have soared to over 20%, raising concerns about the impact of inflation and rising interest rates on consumers' ability to pay off their balances. However, some economists argue that higher wages are helping consumers keep pace with their debt, and the overall rate of charge-offs remains low. Nonetheless, the combination of spent-down pandemic savings and the resumption of federal student loan payments could pose challenges for lower-income borrowers and hinder consumer spending.
Despite increased household wealth in the US, millions of households are struggling financially due to inflation, high interest rates, and rising living costs, which have led to record levels of debt and limited access to credit.
Consumer spending in the US has supported the economy despite concerns of a recession, but rising interest rates, the resumption of student loan payments, and dwindling savings are predicted to put pressure on consumers and potentially lead to a shrinking of personal consumption.
Consumer spending in the US is showing signs of cooling, with retail sales expected to slow down in August, indicating that the resilience of the consumer may be waning due to increased borrowing, depleted savings, and the impact of inflation.
U.S. retail sales rose more than expected in August due to higher gasoline prices, but underlying spending on goods slowed as Americans faced increased inflation and borrowing costs, while the trend in underlying spending on goods was not as robust as initially thought in July. Despite this, overall consumer spending is expected to remain strong, driven by spending on services.
The US economy shows signs of weakness despite pockets of strength, with inflation still above the Fed's 2% target and consumer spending facing challenges ahead, such as the restart of student loan payments and the drain on savings from the pandemic.
The resumption of student loan payments in October could have a substantial impact on consumer spending and the economy, potentially subtracting 0.8 percentage points from consumer spending growth in the fourth quarter and putting pressure on retailers during the crucial holiday shopping season; however, the full extent of the impact remains uncertain due to factors such as income-based repayment programs, the one-year grace period for missed payments, and the potential for borrowers to prioritize other expenses over loan repayments.
U.S. consumers have significantly reduced their spending over the past six months and plan to continue doing so during the upcoming holiday season, with the majority cutting back on non-essential items and essential items.
US retail sales, excluding automotive, are expected to rise by 3.7% over the holiday shopping season, indicating a return to pre-pandemic levels of holiday spending, driven by a more normal inflation environment and consumers' willingness to spend on experiences, electronics, and dining out.
