US retail sales growth is slowing down, especially in big ticket items

​The takeaway: Slowing growth, cautious consumers

While the first two months of the year started off strong, growth of retail sales is slowing.

“These results reflect both slower economic activity and lower prices because of easing inflation – which means fewer dollars spent even if consumers buy the same number of goods – but there is still a lot of spending in the economy,” said NRF Chief Economist Jack Kleinhenz, in a statement.

While slower post-holiday shopping and smaller tax refund checks play a role, the results point to signs that the convergence of inflation and interest rates may be taking more of a toll on consumers. To be sure, inflation is moderating, as observed in a whopping 14.2% decline in sales at gas stations. But people are still paying more for food, and that affects decisions on other purchases. In particular, the categories that include bigger ticket items such as furniture and electronics are in the “doldrums,” amid a downswing in the housing market and waning consumer confidence, said GlobalData Managing Director Neil Saunders.

“The message is that while shoppers are not retrenching completely, they are doing so selectively and are much more cautious about spending,” Saunders said.

Separate data from Circana (formerly IRI and NPD Group) showed that discretionary retail sales fell by 7% in March from the prior year, while volumes fell by 8%. That doubled average monthly declines in January and February. Circana Chief Retail Industry Advisor Marshal Cohen said a lack of new product is also a key contributor, alongside economic headwinds. He called for "new ways of thinking to reflect the changed consumer behavior and retail landscape."

“One of the biggest retail casualties of the pandemic has been the availability of new and refreshed products for consumers, and now economic uncertainty is putting even more pressure on the consumer’s interest in spending,” said Cohen, in a statement. “Manufacturers and retailers need to broadcast their value and prove their worth to the consumer now, in order to avoid a downward spiral later.”

This behavior is colored by increasing worries that higher prices will be sticking around in the near term. The University of Michigan’s initial reading of consumer sentiment for April edged up, but one-year inflation expectations rose from a rate of 3.6% in March to 4.6% in April.

“While consumers have noted the easing of inflation among durable goods and cars, they still expect high inflation to persist, at least in the short run,” wrote UMich Survey of Consumers Director Joanne Hsu.