Despite a slight monthly decrease, year-over-year spending was up in September
By Jonathan Silver, CEO of Affinity Solutions
September: Technically summer but not quite; not yet the holiday season but getting closer. If January is sometimes considered the Monday of months, September feels like a Tuesday. For retailers in particular, September is historically a slow month. The September 2024 CNBC/NRF Retail Monitor, powered by Affinity Solutions, reflected this fact showing a slight increase in year-over-year (YoY), and a slight decrease in month-over-month (MoM) spending.
Seasonally adjusted total retail spending increased 0.55% YoY, but decreased 0.32% MoM, showing that as the inflation rate surpassed expectations and unemployment rates dropped, the economy continues its upward trajectory from a year ago.
The clothing category was a bright spot in September, with sales up 10.31% YoY perhaps attributed to late back-to-school spending. This helped offset the declines in the gas category and sporting goods, hobbies, and books, which were down 14.60% YoY and 9.46% YoY respectively.
Let’s take a deeper look at what else drove consumer spending in September.
Temps Cool Down While Clothing Heats Up
The clothing category continued its 18-month streak of YoY growth and saw a MoM increase of 1.06%. Lingering back-to-school shoppers and the approach of cooler weather (and subsequent wardrobe refreshes) likely fueled much of this growth. We anticipate strong clothing sales to continue with retailers starting holiday deals early.
In fact, most shoppers will start their holiday shopping by Halloween, with 65.5% of shoppers between the ages of 30 to 44 beginning by Oct. 31. To capitalize, Kohl’s offered three days of deals on brands like Nike and Levi’s and free shipping for rewards members. Similarly, Target Circle Week offered heavy discounts on clothing, seasonal items, and toys for early holiday shoppers.
Durables Drag
Durables were down again in September, as Furniture and Home Furnishings dropped 4.80% YoY. Notably, the furniture industry saw Big Lots close 47 stores across the country as part of its bankruptcy process.
Despite the release of Apple’s iPhone 16, Electronics and Appliances dropped 1.63% YoY, suggesting consumers are reluctant to spend on upgrading their devices. However, there’s reason to be optimistic about this category, as Adobe Analytics predicts that retailers will offer holiday discounts of up to 30% off listed prices for electronics.
September was a slow month for home projects with the Building and Garden Supplies category down 4.25% YoY. Retailers like Lowe’s are trying to entice customers by offering members-only discounts, hoping to mirror the success seen by clothing retailers. Home improvement retailers might also see a bit of a boost from the recovery efforts following this devastating hurricane season.
A Mixed Bag for Food
Food prices continue to be a pain point for consumers, with the September CPI showing that food prices were up 2.3% year-over-year.
Restaurant spending decreased 1.13% YoY while grocery spending was up 0.42% YoY. Due to the continued high prices of food, shoppers are seeking the best deals wherever they can find them. A new report from Bricks Meet Clicks found the number of affluent Walmart customers shopping online for groceries expanded to 8%, with growth in YoY revenue almost five times faster than the 4% YoY growth for its overall customer base.
With the holidays approaching, retailers hope to attract budget-conscious consumers with aggressive deals like Walmart’s inflation-free Thanksgiving. This offer provides a holiday meal for 10 people for less than $7 per person, helping shoppers celebrate with friends and family while alleviating financial stress.
Interestingly, according to a Tock survey, 68% of consumers plan to celebrate the season in restaurants and bars, suggesting they are willing to splurge for special occasions. Given that, restaurants should lean into special menu offerings and discounts to win over consumers eager to celebrate the holidays.
What This Means for Retailers
The Fed’s decision to cut interest rates led to a lower inflation rate in September at 2.4%, down from 2.5% in August. With unemployment also falling and wage growth accelerating, the economy seems to be on an upswing despite the slight downturn in spending in September.
As the holiday season approaches, and spending set to hit a record high of $1,638 per shopper, we’re optimistic that we’ll continue to see positive overall gains in the last quarter of the year. Possible interest rate cuts in November and December could also help buoy spending. Retailers should continue offering discounts and special deal days to entice shoppers eager to spend during the holiday season and to help maintain YoY growth in consumer spending.