The news: Inflation is starting to weigh on US consumers’ spending as household consumer spending rose 0.2% month-over-month (MoM) in May, a slowdown from a downwardly revised 0.6% increase in April, per the US Commerce Department.
Looking ahead: Consumers continue to spend, as their YoY household spending rose 8.6% in May.
A significant cooling off: Consumer spending appears to be losing steam.
What it means for retail: Despite the challenging environment, we expect US retail sales to grow 6.4% this year.
The big takeaway: The good news for retailers is that consumers continue to spend. The bad news is that they’ve significantly shifted their spending during the first half of the year. That’s left retailers such as Bed Bath & Beyond, Target and others discounting their excess inventory to keep it moving. To avoid similar mismatches between inventory with consumer demand, retailers in categories which have significantly slowed, such as home goods, may need to take a more conservative approach to merchandising.
Go further: For more on The Era of Uncertainty, read our report here.