In the June 2022 real consumer spending data released by the Bureau of Economic Analysis on Friday, on a three-month annualized basis, spending on both durable and non-durable goods declined for the second consecutive month, furthering the evidence we are in the midst of a “goods-cession.”
After a two-year period in which consumers largely absorbed inflationary concerns and pressed forward on goods purchases, consumers have begun reevaluating where dollars are spent, especially given inflation has not shown signs of cooling (9.1% year-over-year increase in the latest readings).
Since Nov. 21, three-month annualized real consumer spending for durable goods has declined each month with the exception of March and April 2022, a time when annual bonuses and tax refunds helped drive spending habits. Over the same period, non-durable sales have declined in all but one month, furthering the narrative that inflation is forcing consumers to pause on discretionary spending, including apparel, recreational goods and other related purchases.
While inflation is certainly a factor in consumer spending habits, goods fatigue is likely another. As consumers shift away from durable goods purchases, service spending has benefited, experiencing an increase in real spending on a three-month annualized basis each month since January 2021.
Consumers are shifting spending preferences and reevaluating how their dollars are spent. Consumer goods companies should ensure they are properly analyzing customer data and preferences that have shifted from 2021 when goods spending was more robust.