Retail Sales Rise as Consumers Make Room for Bigger Purchases

Retail sales rose 1.2% from July to $773.9 billion, reversing July’s 0.5% decline, with several categories associated with larger household purchases participating in the rebound. Electronics and appliance stores gained 1.6%, furniture and home furnishings rose 0.9%, and motor vehicle and parts dealers increased 0.6%.

The increases reported Wednesday (Sept. 16) by the Census Bureau don’t show that Americans suddenly feel flush. They do show that purchases consumers can often postpone were still being made at a time when PYMNTS Intelligence finds many households have already worked through the easiest ways to cut their budgets.

The gains also raise the possibility that concern about still-high prices may have pulled some larger purchases forward, particularly among consumers able to buy now rather than risk paying more later. The retail data can’t definitively tell us whether that happened. But the breadth of the gains across autos, furniture and electronics and appliances puts purchase timing squarely on the list of things retailers should watch.

That puts the August sales report alongside a less comfortable finding from PYMNTS Intelligence: the consumers producing those sales have very different amounts of money available once the bills are paid.

The September report, “The E-Shaped Economy: What Keeps the Middle Standing,” identifies a vulnerable middle of consumers who live paycheck to paycheck but still pay their bills without difficulty. The danger is how easily some of them can fall into financial distress.

Of paycheck-to-paycheck households that had newly begun struggling to pay their monthly bills, 81% had previously been among those keeping up with their payments.

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Savings provide some insulation. Among paycheck-to-paycheck consumers without payment problems whose financial circumstances improved, 62% had savings covering more than three months of expenses. The share fell to 46% among those whose circumstances remained unchanged and 26% among those whose finances deteriorated.

For retailers, that difference can determine whether a household has room for the next purchase.

After the Easy Cuts Are Gone

The pressure becomes clearer in PYMNTS CEO Karen Webster’s recent column, “Paycheck-to-Paycheck Consumers Have Already Cut the Lattes.” Forty-one percent of paycheck-to-paycheck consumers said day-to-day spending put them in the paycheck-to-paycheck ranks. Another 31% cited a short-term financial shock, while 28% pointed to longer-term commitments involving housing, education, childcare, family support or debt.

More revealing for the August retail numbers is what happens next.

Roughly a third of households that blamed everyday spending or a financial shock said there was nothing left to cut. As Webster described it, the inexpensive trade-offs had already been made. What remained were expenses such as the car, childcare and rent.

“Consumers don’t pay an inflation rate,” Webster wrote. “They pay today’s mortgage or rent, insurance premium, healthcare bill, grocery total, car payment and childcare invoice.” She noted that those costs remained elevated even after inflation eased from its peak.

August’s retail numbers indicate some resilience, to be sure, but also offer some caution for the final months of the year, into the all-important holiday season.

A consumer with savings can replace the refrigerator when it breaks, buy the laptop before school starts or absorb a car payment. A household already down to expenses it considers essential has fewer ways to make the same purchase fit. If some larger purchases were pulled forward, retailers could be looking at demand borrowed from future months just as more consumers are losing the financial cushion to replace it.