State of the Consumer: June 2024
The past month has seen a mixed economic landscape with consumers dealing with inflationary pressures, fluctuating consumer confidence, and shifts in spending patterns.
What does this mean for your business now that we are beginning to see a clear tide start to turn with the consumer? Let’s dive into the data…
Retail Sales are Weaker
Last week, retail sales came in substantially weaker than expected for May. Sales rose only 0.1% on the month, which was a 1/10 of a percentage point below expectations. However, this result was slightly better than the revised down 0.2% decline in April. Year-over-year, sales rose 2.3%.
However, the sales number is worse when we exclude autos, showing -0.1% compared to the estimate of +0.2%. Gas sales declined 2.2% (due to declining prices) but a 2.8% increase was seen at sporting goods, books and music stores. Restaurants and bars witnessed a 0.4% decline with furniture seeing a 1.1% drop.
Here’s a breakdown of the major retail categories and their sales growth rates for May:
Building Materials & Garden Supply: -0.8%
Clothing & Accessories: 0.9%
Electronics & Appliances: 0.4%
Grocery: -0.2%
Furniture & Home: -1.1%
Gas Stations: -2.2%
Health & Personal Care: 0.1%
Restaurants & Bars: -0.4%
Sporting Goods, Books, Hobby & Music: 2.8%
The Conference Board reported that going out to eat was the #1 expense low- and middle-income consumers planned to cut back on. A decline in furniture prices is not a surprise as we saw record sales levels for the sector during the pandemic and home sales continue to be low due to high mortgage rates and limited inventory.
However, several industries are seeing sales levels increase, suggesting that customers are being wise about where and how they spend their money. Opportunities certainly abound in these categories.
An Upside Surprise on Consumer Sentiment
Although ongoing inflationary pressures have taken a toll on consumer confidence in the past 4 months, consumer confidence rose in May. The Conference Board’s sentiment indicator increased to 102 from a revised 97.5 in April. While it is a pleasant May surprise, consumer confidence has suffered in previous months due to inflation, high interest rates and record household debt levels.
Softening Labor Market
The May jobs report showed the addition of 272,000 jobs - a massive upside surprise from the estimated 190,000 jobs. However, the unemployment rate rose to 4%, the highest level since January 2022. Economists were expecting this rate to stay unchanged at 3.9%.
While the jobs report appears to be hot, economists point to the drop in household employment, which may signal a possible turn in the broader economy.
Evolving Shopping Behaviors
As I mentioned in a recent newsletter, consumers are starting to protest over post-pandemic price increases at major retailers. In response, mega retailers Walmart and Target recently announced price cuts on thousands of common household items.
Along with these softening labor market numbers, financial stress is now being seen in higher debt levels and a rise in overdue bills and credit card delinquencies. Consumers are cutting back on spending and perhaps are not as resilient against higher interest levels as economists thought they were.
The next 2 months of economic data will be critical to watch, especially regarding any possible interest rate cuts the Federal Reserve may make soon.
Are you interested in more consumer data, specifically for your business? Contact me here or at the options below.
- Kristen
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