Consumers are pulling back on some discretionary spending

If you dig into the retail sales data from September, you’ll find there are particular areas where consumers are pulling back. While gas stations saw their sales go up a lot, thanks in large part to higher gas prices, some discretionary categories took a hit. For example, spending at sporting goods, hobby, musical instrument, and book stores was down 0.5% from the month before after rising pretty steadily most of the year.

When you go into a hobby or sporting goods store, it’s full of things you actually need for that hobby — say, a fishing rod — and things you probably don’t — say, sandals shaped like largemouth bass.

“When money gets tighter, those are the kind of things that people will forego,” said Neil Saunders, managing director at GlobalData.

And money is tight right now — prices are up, wages are not keeping pace, and the fish flip-flop fund is going towards essentials, like food and fuel.

This is really hitting low-income consumers, said Morning Consult economist Sofia Baig.

“You know, gas isn't a huge part of the budget, but it's something that people can't avoid, and so, it's taking a larger bite,” she said.

One knock-on effect, Baig said, is that a growing number of companies are creating products aimed at a higher-income clientele.

“More and more, a lot of the things are catered to the people who have the money to pay for it,” she said.

Baig added that even as necessities get more expensive, companies believe high-income people can still be relied upon to spend.