Higher interest rates are taking a toll, says NRF
By Alan Wolf, YSN
It’s official: consumer spending growth is slowing as the economy settles down amid higher inflation-fighting interest rates.
According to the National Retail Federation’s (NRF’s) Monthly Economic Review for August, year-over-year spending growth decelerated to 1.6% in the second quarter from 4.2% in the first quarter. Although the economy was clearly more resilient in the first half of this year than many expected, and job and wage gains have counterbalanced inflation, financial challenges continue for consumers, the trade group said, including a dwindling stockpile of savings that was accumulated during the pandemic.
“Consumers are still spending but are under financial pressure and have been adjusting how much they buy while also shifting from goods to services,” said NRF Chief Economist Jack Kleinhenz.
Furniture and appliance dealers have been feeling the subsequent pinch more acutely than other merchants, as their customers retrench from a post-pandemic spending spree. July sales were down 1.8% from June for the nation’s home furnishings merchants, U.S. Census Bureau data shows, while appliance and electronics stores saw sales slip 1.3% over the same period.
Other harbingers of a slowdown are a slight dip in new jobs and a nearly $1 billion contraction in revolving credit (mostly credit cards) in June.
Nonetheless, consumers are still buying more than last year, Kleinhenz said, and continue to drive the U.S. economy through this period of economic pressure.