How long can consumers keep spending in this economy?
How long can consumers keep spending in this economy?
We get new numbers this morning on April retail sales. In March, they were up 0.5%.
So far this year, strong retail sales have been driven by consumers who still seem willing to spend-it-up and also by inflation. Keep in mind — the monthly retail sales figures incorporate the higher prices we’ve been paying — for everything from cars to groceries to gasoline.
But high inflation could start to put a dent in consumer spending.
Consumers are being buffeted by strong and contrary economic winds, said Mark Cohen at Columbia Business School. “Wages are up, unemployment is down,” he said. All good, but at the same time, “inflation is wildly up, and there’s a tremendous amount of unease.”
“Sentiment really is turning pretty sour — it has been for a while,” said Kayla Bruun at polling firm Morning Consult. She said consumer surveys show rising financial anxiety about inflation, and a shift in behavior to respond.
“Price sensitivity, trading down to cheaper alternatives, all of which would feed into deferring purchases or opting out of purchases,” she said.
And rising prices may start to cut in to households’ ability to keep up their spending, said Arun Sundaram at CFRA Research.
“Now we’re also starting to see the savings rate come down meaningfully,” he said.
Consumers built up their savings in the pandemic … now they’re digging into them to pay their bills.
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