Consumer Spending Holds Steady, Offering Glimmers of Hope Amidst Economic Uncertainty
New York, NY – Despite persistent economic anxieties, American consumers are showing surprising resilience, according to the latest data from the CNBC National Retail Federation (NRF) Retail Monitor. The July report reveals a modest increase in spending compared to June, indicating that consumers are continuing to spend, albeit cautiously, and that the economy may not be as fragile as some feared.
The report, compiled by Affinity Solutions using actual credit card spending data, shows a 0.7% rise in total retail sales excluding auto and gas, compared to the previous month. This positive trend was observed across 10 out of 12 spending categories, suggesting a broader upward trajectory.
“The data do offer some optimism,” said Steve Leasman, CNBC’s NRF retail monitor expert. “Consumers are keeping their momentum going in the third quarter.” This optimism is further bolstered by a 1% rise in core retail sales (excluding restaurants), indicating a stronger underlying trend in consumer spending.
While the data suggests a positive outlook, certain sectors are struggling. Clothing sales continue to face headwinds, with sales dropping year-over-year. Gas station sales, while experiencing a temporary surge in July, are down 3% year-over-year.
However, other sectors are thriving. Back-to-school spending and online promotions like Amazon’s Prime Day seem to be driving strong sales in general merchandise, furniture and home furnishings, electronics, and appliances. Notably, college students furnishing their dorms are likely contributing to the rise in furniture sales.
The NRF’s Retail Monitor data, which has been consistently running slightly above the Census retail sales data, suggests that the economy could be more robust than initially anticipated. Still, economists caution that consumer spending remains cautious, driven by a quest for value and good prices.
"Consumers are out there spending, but they’re being very selective," explained Leasman. "They’re looking for deals and prioritizing their spending on essentials and experiences."
The release of the Retail Monitor comes ahead of the government’s retail sales report, scheduled for Thursday. Economists polled by Reuters predict a modest 0.3% gain in headline retail sales and a 0.1% increase excluding autos.
While the economy faces headwinds, the latest retail data suggests that consumers are not throwing in the towel just yet. Continued spending, albeit with a focus on value and essentials, could offer a glimmer of hope amidst the economic uncertainty.
The Retail Revival: Is Consumer Confidence Back?
Despite whispers of an economic slowdown, retail spending has shown signs of resilience in July, indicating that the consumer may not be ready to abandon their wallets just yet. New data from the CNBC National Retail Federation (NRF) Retail Monitor reveals a modest boost in consumer spending compared to June, suggesting that consumers are maintaining their momentum heading into the crucial back-to-school season. The data offers a glimmer of hope for retailers, but it’s still too early to declare a victory.
Key Takeaways:
- Retail sales (excluding autos and gas) rose 0.7% in July compared to June, signaling a slight improvement in consumer spending.
- Year-over-year sales growth (excluding autos and gas) slowed to 0.9%, down from 3.4% in June.
- Core retail sales, excluding restaurants, saw a more robust increase of 1% compared to the previous month, with a year-over-year growth of 1.7%.
- Back-to-school spending and online sales promotions, such as Amazon Prime Day, seem to have boosted overall retail sales.
A Closer Look at Spending Trends
The CNBC NRF Retail Monitor highlights a diverse spending landscape, with both positive and negative trends emerging.
Spending Surge in Key Categories
- General Merchandise: This sector continues to perform well, demonstrating resilience in a typically competitive environment.
- Electronics and Appliances: This sector witnessed a steady increase in sales, likely driven by consumer demand for durable goods and technological advancements.
- Furniture and Home Furnishings: This sector saw a positive boost, potentially influenced by back-to-school spending and college students furnishing their dorms.
- Restaurants and Bars: This category experienced strong growth, suggesting that consumers are still willing to indulge in dining experiences.
Struggles in Some Sectors
- Gas Stations: While gas station sales rose slightly overall, they witnessed a 3% year-over-year decline.
- Clothing: This sector continues to struggle, indicating a potential shift in consumer priorities or an impact from ongoing inflationary pressures.
- Health Care, Health and Personal Care: These categories experienced a decline, suggesting a possible slowdown in spending on non-essential items.
- Building and Garden Supplies: This sector also saw a decrease in sales, potentially reflecting a cooling housing market.
The Future of Consumer Spending
While the latest retail data provides a few optimistic signals, economists remain cautious. The July jobs report, which showed strong employment growth, has raised questions about the economic outlook. The retail monitor suggests that the economy may not be as weak as some have feared, but consumer sentiment remains fragile.
"Consumers remain cautious, but they’re out there still spending, especially where they find value and good prices," stated an NRF economist.
This cautious optimism is reflected in projections for upcoming retail sales. Economists surveyed by Reuters expect a 0.3% increase in headline retail sales for July, with a 0.1% increase after excluding autos. These figures, while positive, indicate that consumers are still carefully managing their spending habits.
A Crucial Back-to-School Season
The upcoming back-to-school season is crucial for retailers. The NRF Retail Monitor data suggests that consumers are already spending more in key back-to-school categories, offering a potential boost for retailers. This trend will likely be further amplified by the growing popularity of online sales promotions and the increasing demand for durable goods. However, the strength of this season will ultimately depend on consumer confidence and continued control over inflation.
"The retail monitor suggests that maybe rumors of the economy’s demise could be premature," said CNBC’s Morgan Brennan.
The retail sector remains in a state of flux, with a combination of positive and negative trends shaping the future of consumer spending. The upcoming months will be pivotal in determining whether the current momentum in retail sales translates into sustained growth or merely a temporary reprieve in a challenging economic environment. As we head into the holiday season, retailers and economists alike will be closely watching consumer behavior to gauge the true health of the economy and the future of retail.
