Although consumer confidence is rising, it’s not enough to boost most nice-to-have category spending
By Jonathan Silver, CEO of Affinity Solutions
If you thought about a summer patio furniture refresh this June but neglected to splurge, you’re not alone. While consumers may be feeling more optimistic about their finances and spending is on the rise, a closer look at the data reveals a tale of two trends.
On the one hand, the majority of Americans expect their financial situations to stay steady or improve over the next 12 months and retail sales reflect this confidence. On the other hand, even with declining inflation rates, the data shows consumers are being more strategic with their dollars, focusing on essentials with discretionary income taking a backseat.
The Bird’s Eye View
According to the June 2024 CNBC/NRF Retail Monitor, powered by Affinity Solutions, seasonally adjusted total retail spending increased 3.42% year-over-year (YoY), hitting growth levels not seen since November 2023, and core retail spending increased 3.07% YoY unadjusted, its highest jump since January.
When we break down the numbers at the category level, telling trends emerge:
Durables Continue Their Decline While Groceries Grow
While grocery inflation was down from its peak in 2022 to 1.1% in June, grocery prices are still 25% higher than in 2019. Despite that, our numbers are showing grocery store spending up 4.31% year-over-year in June and 1.01% month-over-month (MoM). With high prices on grocery items and other staples, consumers are cutting back on replacing or updating their larger household items, making do with what they already have.
For example, durable goods, which include Furniture, Electronics, Appliances, and Building Supplies, experienced another month of decline following a brief uptick in April. Furniture and Home Furnishings were down 3.26% YoY and 0.62% MoM, while Electronics saw a YoY decline of 3.24% and MoM decline of 1.02%. Building and Garden Supplies declined 3.46% YoY and 1.80% MoM in June, marking the second-worst adjusted MoM value in the category since last October.
We might see a boost in spending on durables in the coming months, though, as consumers in impacted states stock up on appliances like generators or boarding materials to prepare for what’s expected to be a turbulent hurricane season.
Amazon Primed to Maintain Growth
Notably, consumers are continuing to spend heavily at non-store retailers, which include online retailers and e-commerce platforms. This category seems to be almost inflation-proof. Overall, the non-store retail category saw 23.08% year-over-year growth and 1.78% month-over-month growth. Consumers are finding value at online retailers, thanks to the numerous deals offered weekly and perks like free shipping and easy returns. Consumers may also be finding more of their essentials at non-store retailers; online grocery shopping is forecasted to grow 12% in 2024, according to eMarketer. Amazon registered a year-over-year increase of 4.8% and a solid 1.2% month-over-month increase in June.
We expect another strong showing this month, especially with Amazon Prime Day and new competitive retailer July deal days. Consumers often wait for these sales clear their wish lists and open their wallets to take advantage of great deals for back-to-school and early holiday shopping.
The Overall Economic Picture
Increased consumer spending and the easing of the US inflation rate throughout June signal the continued strength of the post-pandemic economic recovery. The stronger-than-expected result means that the Fed is likely to cut interest rates in September, potentially helping to boost spending in some of those nice-to-have categories. We’re not out of the woods yet, though, as unemployment was up slightly in June, and the Presidential election brings uncertainty. We urge retailers to adjust their pricing and promotional strategies to the changing economic environment, using data-driven insights to inform those tactics.
