The latest reading on retail sales numbers show that the Grinch is creeping into the room — in the form of inflation — threatening to upend the holiday spending that so many retailers have been banking on.
Or maybe not.
You’re no doubt aware that all aspects of life are notably more expensive. Retailers, too, depending on where you look, have passed along price increases to end consumers. Wholesale prices, in the latest reading, gained 9.6% over 2020’s levels, as measured in November, setting a new record for inflation. The ripple effect, not surprisingly, translates into sticker shock.
Thus, we’re seeing individuals and families dialing back a bit.
As reported Wednesday (Dec. 15), retail sales slowed to a much weaker than expected 0.3% in November. The declines were felt, as the Census Bureau reported, most keenly at department stores and electronics and appliance dealers.
The latest headline number of a 30 basis point gain is still a gain, yes, but is a marked slowdown from the 1.8% gains seen as recently as October. That pulled the pace of holiday season shopping down from an 8-month high of 1.8% in October. And if one excludes the volatile inputs of gasoline and food, the retail data look even more muted, coming in at 20 basis points, consecutively.
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Read also: Slumping Department Store and Electronics Purchases Cut Nov Retail Sales to 0.3%
So much, we note, depends on the paycheck-to-paycheck consumer. These individuals and families, as we’ve detailed in past research, make up a majority of the U.S. population — 57%, in fact.
These consumers feel pressure trying to make ends meet, and that pressure cuts deep and wide, affecting a significant percentage of the highest earners, too (12% of those making as much as $100,000 annually).
Read here: Reality Check: The Paycheck-To-Paycheck Report
The latest P2P report, as we call it around here for short, signals some turbulence ahead. About 46% of consumers are pessimistic about the economy. And a whopping 81% of individuals we queried said they are “highly concerned” about inflation. With so many data points massing that give a nod to persistent inflation, it stands to reason that many people will re-examine their holiday spending plans, as they realize that over-extending one’s financial liabilities may spell trouble down the line.
A chunk of the government support — chiefly through tax relief and economic impact payments — that have been a mainstay of the past 18 months are on the way out. At the same time, central bank data show that credit card debt is creeping up. U.S. credit card debt increased by $17 billion in the most recent quarter, the second straight quarterly increase. By contrast, U.S. borrowers had been paying down their cards over the previous two quarters.
Total household debt has topped $15 trillion, having increased by $286 billion, or 1.9%, in the most recent quarter. Mortgage balances — the largest component of household debt as detailed by the Fed — rose by $230 billion to reach $10.7 trillion at the end of September. With purchasing power taking a hit, with monthly obligations creeping up a bit, the need to “re-juggle” priorities may be found through a holiday spending pullback.
