In our four-part blog series, RSM’s senior industry analysts explore back-to-school shopping trends and the impact on consumer businesses. In our final post, we provide a look back at spending habits and what’s to come for the holidays.
As we enter the second half of September and with students back in the classroom, it’s time for a step back and some assessments of consumer spending given the recent release of retail sales results through August from the U.S. Census Bureau.
After robust spending by consumers last year that saw significant year-over-year increases for select back-to-school retailers, partially driven by additional spending dollars from the child tax credit, spending this year has been a different story as consumers have been affected by high inflation and have shifted some spending toward services.
On a year-over-year basis, nominal sales for the combined period of July and August for furniture and appliance retailers declined by 3.5%, while clothing and accessory stores, and sporting goods and hobby retailers, benefited from a 2.5% and 4.6% increase, respectively.
These year-over-year changes are significantly lower than last year, which had increases of 16.8%, 38.9% and 15.3%, respectively, and are below top-line inflation, which increased by 8.2% on a year-over-year basis in August .
A driver of this decline in annual growth could be a shift of spending toward nonstore retailers (online-based sales) which increased by 14.7% on a year-over-year basis over the same period.
What is more likely, however, is that consumers continue to shift spending habits in the face of high inflation and pent-up demand for services. There was an expectation that consumers would forego certain back-to-school shopping in the face of inflationary pressures, and the most recent data may confirm this expectation.
As we look to the holiday season, with gas prices receding and inflationary pressures expected to ease, we would expect consumers will continue to spend on goods, albeit perhaps not at the same levels of last year.
Consumer spending has clearly been affected by inflationary and other macroeconomic factors, according to early back-to-school shopping analysis. Retailers and other consumer goods companies will need to continue to provide consumers with seamless shopping experiences and the right inventory to capitalize on what will be a competitive holiday season.