Consumers in the US are engaged in cost-saving measures as they fear an imminent recession and higher inflation. According to today’s news gathered from US news websites, consumers continue their spending on essentials like groceries while pulling back on electronics and apparel.
Consumers focus on buying smaller lots
According to a communiqué from Best Buy Inc. and Macy’s Inc., the sales are expected to decline in 2023 as higher inflation and other economic issues spook consumers into pulling back their spending. Jeff Gennette, CEO of Macy’s, claimed consumers will be in worse shape this year compared to 2022. The largest supermarket operator in the US, Kroger Co.’s CEO, Rodney McMullen, said shoppers are focusing their spending on smaller lots of products such as paper products and cheaper store brands.
Rodney went on to say that the purchasing behavior of consumers reflects that they are already in a recession. However, they are spending more on products like premium beer. The retailers’ quarterly reports show a divergent trend. The sellers of products like casual wear and home goods have enjoyed higher margins during the pandemic.
Improved spending on entertainment and travel
Consumers have increased their spending on entertainment and travel with the easing of pandemic restrictions. According to executives and retail analysts, a downturn in the stock markets, increasing prices, and shifts in the market for labor have hit the sentiment of shoppers across the nation.
According to data gathered from the Commerce Department, Americans have not completely turned their backs on spending. Encouraged by additional incomes, spending among Americans has shown an uptrend in January 2023. Retail spending has increased by 3% from December 2022 to January 2023 because of increased purchases of clothing, furniture, vehicles, and dining. According to a survey conducted by the University of Michigan, the mood of consumers has improved in recent months compared to multidecade lows recorded in the past summer because of cooling inflation.
Spending $450 billion to return to services
LPL Financial’s chief economist, Jeffrey Roach, said consumer spending is expected to be strong in the future as long as wage growth, the labor market, and savings rates are steady. He also said the trend is shifting slowly from goods to services. According to the latest USA news, spending on goods surged to 33% as of January 2023, compared to 30% before the onset of the pandemic. Roach said an amount of $450 billion is forecasted for services, sucking away from goods as spending returns to pre-pandemic levels.
People have reduced their spending on some unimportant purchases, and in some cases, they have settled for cheaper brands to cope with rising inflation. According to a communiqué, Walmart pocketed higher incomes from consumers who were looking for deals on goods. Burlington Stores Inc. and T.J. Maxx Parent are some of the brands that offer value and have reported handsome gains in sales. Citing uncertain economics, Big Lots Inc., a home décor and furniture retailer, said on Thursday it is not issuing any guidance as of now. Macy’s forecast a drop of 3% in its sales this year.
