Decoding the Recent Retail Sales Report: Department Stores and Gas Hit Worst
Americans are definitely spending more cautiously as spending declined for the second straight month, albeit by 1% in March: retail, restaurants, and gas all included in this pullback -- according to data reported by the Commerce Department in a recent WSJ Article.
Hiring has also eased and manufacturing output slightly declined. Online has slowed, but still outpaces retail sales which were in decline.
Some additional categories affected by decline in March as compared to February: electronics & appliances, home improvement, furniture, and automobiles.
What does this mean for brands and retailers?
Overall, it seems to mean that things are getting incrementally worse regarding consumer spending. In my opinion, this is how a recession really starts. Interest rates seem to have affected the consumer's willingness to borrow money to pay for purchases overall.
Recall for the past 10 years, it was very easy to get zero percent financing. Those days are ending... and if they are not, the penalties for not paying off the balance at the end of the period are higher than ever. I just checked a $2k stainless stell refrigerator at Best Buy. No interest for 18 months, but after then?
30% APR. Oof. It's no wonder large electronics, appliance, and auto sales are off.
There are two other economic tidbits to keep in mind as we go forward:
First, large retailers like Walmart predicted that unit sales would be slightly less in the second half of the year than the first half.
Second, most economic reports -- including those used by Walmart the S&P Global Economic Outlook -- counted on the end of the Ukraine war by mid-year. Does that seem likely to anyone?
Sometimes old news is new news. Online remains strong, but it's likely because we are talking about smaller purchases overall as compared to retail. The overall picture still remains a category-by-category story at the moment.
