“Sales have been a little uneven, which is why we’re seeing sales growth compared to 90 days ago,” Walmart Chief Financial Officer John David Rainey told analysts on a conference call Thursday to discuss the company’s third-quarter earnings. “It gives us reason to think a little more carefully about consumers.”
Consumer restraint was felt across the economy in October, with retail sales down 0.1% from the previous month, the first decline in six months, according to the Commerce Department. A report from Adobe Analytics found that people spending more are increasingly embracing alternative payment methods, with “buy now, pay later” purchases up 6% year-over-year.
Customers on a budget are putting greater scrutiny on their purchases, asking themselves, “Will this really add value to my life?” Christina Hennington, Target’s chief growth officer, said this week on an earnings call.
Top executives at other retailers expect the same. Macy’s Chief Financial Officer Adrian Mitchell warned that the company expects “consumers to continue to experience challenges.” Katrina O’Connell, Gap’s chief financial officer, said the retailer was “just trying to remain cautious with consumers.” Williams-Sonoma executives noted that even as the company remains optimistic about the holiday season, the company is dealing with “continued consumer hesitancy.”
The National Retail Federation predicts that holiday shoppers will spend more than last year, but at a slower pace than in recent years. The group expects retail sales to rise 3% to 4% in November and December as Americans consider renewed economic uncertainty, a slower pace than the 5.4% increase recorded last year. It is an increase.
Jack Kleinhenz, chief economist at the retail group, pointed to the recent rise in the unemployment rate despite a historically strong job market, saying, “When people feel less confident about their jobs, they feel less secure about their spending.” I lose my sense of feeling.” “The ability to spend is there, but the problem is the will.”
The number of seasonal job postings is at its lowest level in a decade as companies prepare for the slow season, according to Labor Tracker Challenger, Gray & Christmas.
Economists say shoppers have good reason to be wary, as consumers and the economy itself appear to be at a tipping point.
Two years of rampant inflation, which sent prices soaring to a 40-year high and strained household budgets, finally appears to be calming down. But to curb this phenomenon, the Federal Reserve raised interest rates to the highest level in 22 years, causing borrowing costs to soar.
As prices rose, consumers initially turned to pandemic-era emergency payments and debt forgiveness programs to shore up their personal finances. They have turned to credit cards and other borrowings in recent months after drawing down more than $2 trillion in savings since the pandemic, a development that worries some economists.
Credit card debt is piling up at a historic rate — Consumers Added According to the Federal Reserve Bank of New York, the balance stood at $154 billion last quarter, the largest year-over-year increase on record.That debt suddenly became more expensive as interest rates rose and the average interest rate on credit cards rose. rising According to Bankrate.com, it rose to an all-time high of 20.7% from 16.3% two years ago.
Meanwhile, borrowers are falling further behind in their payments. Nearly 8% of total credit card debt is at least 30 days past due, the highest number since the Great Recession.
Justin Begley, an economist at Moody’s Analytics, called the surge in credit card balances “concerning,” but added, “Generally speaking, U.S. households remain in fairly good financial shape. ” he pointed out.
Begley added that delinquency rates should peak next year, as long as wage growth continues to outpace inflation and interest rates fall, allowing some borrowers to refinance their debt.
But for now, Americans’ economic outlook remains bleak. Consumer sentiment this month fell to its lowest level since May, according to the University of Michigan. Shoppers are focusing more on the prices of essentials such as gas and food than on the slowing pace of rise. worry On the impact of high interest rates and the wars in Ukraine and Gaza.
Other surveys support these findings, with 81 percent of registered voters responding. evaluation A recent poll by The New York Times and Siena College found that only 19% rated the economy as “fair” or “poor,” while only 19% said it was “good” or “excellent.”
Bob Schwartz, senior economist at Oxford Economics, said newly cautious consumers will likely respond by cutting back on spending, though not stopping it altogether.
“People like to vent in surveys, but that doesn’t necessarily influence their behavior,” Schwartz says. “I believe you should look at what people do, not what they say.”
Jaclyn Peiser contributed to this report.
