It remains to be seen if April will be the pause that refreshes or if consumers will pinch their wallets shut for a longer period, ushering in summer doldrums for merchants.
The U.S. Department of Commerce detailed Wednesday (May 15) that in April, retail sales were unchanged in March, which in turn had been revised downward from 0.7% in the previous reading to 0.6% over February’s levels.
The headline April data missed consensus estimates, which had been for a 0.4% gain in the month.
The pullback was most keenly felt in segments like non-store retailers, widely used as a proxy for online sales, which were down 1.2% in the month. General merchandise stores saw a 0.3% drop, sales at sporting goods and hobby stores slipped 0.9%, and retail sales were 0.6% lower at health and beauty establishments.
The home improvement category showed some pressure, as furniture/furnishing businesses lost 0.5% month over month. When Home Depot reported first-quarter 2024 earnings Tuesday (May 14), management told investors that many of today’s consumers are sitting out on major home projects as a result of high interest rates and macro pressures.
“Goods are underperforming services,” Home Depot Chair, President and CEO Ted Decker said on the call.
There was some momentum in the apparel sector, as consumers spent 1.6% more compared to March. Restaurants barely eked out a gain, as sales were 0.2% higher. Grocery sales were 0.8% higher in the month.
The picture that emerges, then, is one of restraint, as consumers weigh several competing concerns.
As found by the Federal Reserve in April, consumers expect inflation to be higher one year from now and higher five years from now. PYMNTS Intelligence found that during the first quarter of this year, 42% of consumers said they expected the interest rates of their loans to increase during 2024. And about 20% of paycheck-to-paycheck consumers — which is estimated by PYMNTS to be about 60% of the population — said they expected to have to dip into savings to pay their monthly bills.
The first quarter may be off to a rocky start. Although separate data released by the government Wednesday indicated that inflation’s pace eased a bit in April, to 3.4%, prices remain high.
It may be the case that the decline in online sales, at least for April, may have come as consumers opted more for in-person shopping, getting out and about. But the declines in many discretionary spending categories indicate that even in-person shopping has been — to put it mildly — judicious. Consumers seem to be choosy, at least now, about where they’re putting their dollars.
In a study released last month, PYMNTS Intelligence found that 16% of Generation X consumers indicated that splurging had led to financial distress. As many as 24% of millennials confessed that splurging on nonessential items contributed to their financial woes, and 34% of Generation Z consumers said the same.
Whether April’s pause is a blip — a retrenchment before spending picks up again — may be no sure bet.
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