U.S. retail sales in September held fairly steady, rising 3.4% overall in the sectors tracked by Retail Dive, according to the numbers released monthly by the U.S. Department of Commerce. Still, the report portends a tepid holiday shopping season, analysts say.
“A more cautious and considered consumer mindset continues to set in,” GlobalData Managing Director Neil Saunders said in emailed comments. “This holiday will not be a terrible one for most retailers, but it will be much more challenging than the past few years.”
While inflation has eased, freeing up household funds for discretionary spending, consumers remain under pressure on several fronts. Fuel prices and interest rates have spiked, student loan payments are resuming and any savings built up thanks to pandemic-related relief is dwindling or gone, analysts say.
“However, there is still some reason for optimism in that consumers still have the financial capacity to override some of these challenges over the holidays and, instead, deal with them in the new year,” Saunders said. “Quite how this pans out remains to be seen, so our working assumption is still to assume that retail will have a soft landing at the back end of the year.”
Some consumers are in a better position to shrug off the financial headwinds. That is tempering the effect of the end of student loan forgiveness, struck down by the Supreme Court earlier this year, which this month will compel millions of borrowers to resume payments. According to RSM U.S. research, student loan obligations haven’t been as troublesome for retailers as other analysts have predicted.
“Consumers are still able to and willing to spend, especially those in the upper income levels. Strong wage gains and a strong labor market continue to give consumers the confidence to spend, and they are doing so,” RSM U.S. Consumer Products Senior Analyst Mike Graziano said in emailed comments, adding, “The consumer continues to be the backbone of the economy, and likely a good sign for Holiday 2023 shopping.”
Holiday spending may not be all that focused on buying goods, however. For many, priorities have shifted in favor of experiences like travel, dining out and events like concerts, according to Bankrate. In September, electronics and apparel — both traditional holiday purchases — posted the largest month-on-month retail sales declines, Bankrate Senior Industry Analyst Ted Rossman noted in emailed comments.
Sales at electronics stores fell 2.5% year over year, despite what GlobalData’s Saunders called a “relatively successful launch of Apple’s new iPhone towards the end of the month,” while furniture and home improvement sales each declined 6.5%.
“While activity may pick up as consumers winterize their homes and start to prepare them for the holidays, we do not expect these sectors to swing into growth,” he said.
October will yield more clues about what exactly that means for retailers, especially if shoppers begin as early as many expect. A recent Bankrate survey found that half of holiday consumers will begin their shopping before the end of the month, with a third saying that inflation will affect their buying behavior.
In general, Bankrate’s Rossman foresees a frugal holiday customer who needs deep discounts to make a purchase. Holiday sales growth is unlikely to beat inflation this year, poised to land at about 2% year over year, he said.
“Despite these positive numbers [in September], I still think it’s going to be a lukewarm holiday season for retailers,” he said.
