On the face of it, a 25% fall in gas prices should have meant a little more. More a recovery in consumer spending.
And if that isn’t enough to boost consumer spending and the sentiment that leads to continued spending – the question remains, what will happen?
For retailers — particularly electronics and furniture companies — for restaurants, the latest US government data is a bit ominous. There are a limited number of levers to pull, and none of them help margin at all.
Less spending at the pump means more in the proverbial pocket, which means more discretionary income can be distributed.
But based on the data points in Wednesday’s (17 August) evidence, we didn’t see that.
As reported, monthly sales in July, not adjusted for price changes, totaled $683 billion, according to the US Census Bureau report. It’s flat for July, but if you exclude autos and gas, spending rose 0.7%. Growth is growth, yes, but we’re a long way from the kind of development that drives the flow to the bottom line.
Also read: Retail sales stagnate in July due to further drop in pump prices
There is no one-to-one ratio for the bank when it comes to spending, we note. There is no multiplier to suggest that a dollar saving at the gas station (gasoline prices per gallon over the past two months have been roughly below that amount) translates into a multiple dollar spend that shows up in other areas of work.
anemic expenditure data
Indeed, government data showed that total retail spending was flat, groceries rose 0.2% basis points, electronics rose 0.4% (all from June). Out-of-store purchases, commonly used as an abbreviation for online spending, totaled $104.5 billion in July, up slightly from June’s $101.5 billion.
So: profit, yes, but nothing attributable to a sharp drop in gas prices. Among other data points, Target struggled with an inventory overhang, where moving goods around the shelf hurt profits, and management noted that consumers are cutting back on voluntary spending.
The fact that some of the above categories have seen some growth reflects the fact that consumers are choosing and choosing where to spend their money; And the slow increase also indicates that there is some saturation in the mix. Consumers look at inflation but also realize that it is not possible to need Additional accessories or electronics. Blood loss was 0.1% basis points higher in restaurant spending – and people clearly aren’t. to need Getting outside… even between hot weather and al fresco dining and reopening.
Meanwhile, the Fed is bullish on inflation, and even with a 75 basis point hike in the fed funds rate — setting the tone for interest rates on credit cards and other debt — it’s still rising. Might be possible.
This means that wallet searches for credit cards may not be as automated as they used to be. The July data may have marked a peak where even a fall in gas prices was not enough to keep the US economy’s engine (ie consumer spending) running.
What will happen next?
Budget pressures, clearly marked by Labor Day and the all-important holiday season, do not bode well for retail. As we’ve noted, there are few ways to provide tailwind to spend. Lowering prices is one of them — but it eats into profits (we saw that at Target). The price is different, but it can also become a cost center. Narrow selection but the possibility if retail spending remains low may be considered by many retailers.
New PYMNTS survey found 3 out of 4 users have high demand for super apps
around: The results of the new PYMNTS study “The Super App Shift: How Consumers Want to Save, Shop and Spend in the Connected Economy” analyzed the responses of 9,904 consumers in Australia, Germany, the UK and the US. and showed strong demand for single multifunctional super apps instead of using dozens of individuals.