American consumer spending, specifically retail spending exclusive of bills related to restaurants, bars, gas stations, and cars, displayed an upward trend by growing 0.6% in October, recovering from a 0.5% decline in September, according to National Retail Federation data. This trend seems counterintuitive given the currently bleak consumer sentiment and the uncertainty surrounding the economy, largely due to the unprecedented shutdown of the federal government.
The National Retail Federation (NRF) suggests that this is a behavior that arose during the pandemic – despite feeling less secure, consumers are maintaining their spendings and continue to drive the economy forward as a result of their active participation in commerce.
All of this happens when Americans rate their current economic condition worse than ever, a result from a survey by the University of Michigan. Rising inflation, increased layoffs, and reduced seasonal hiring contribute to the mounting concern.
It’s to be noted that the buoyancy of retail spending may be explained by the fact that the hardships faced by the lower-income population may not reflect in broad economic data. These families may still prioritize holiday spending, while cutting back on other aspects.
Companies like Bark, a dog food, toys, and supplies provider, remarks that its advent calendar has already sold out at Costco, pointing to optimism for the coming months. Fashion brand Ralph Lauren also raised its revenue forecast for the fiscal year during its latest quarterly results.
Expecting this trend to continue through the holiday season, NRF predicts retail spending will reach over $1 trillion. Many are benefiting from a strong stock market, which along with necessary lifestyle adjustments, are allowing even struggling households to maintain spending on traditions and family.
"We expect them to continue to prioritize spending on loved ones, spending on family," NRF Chief Economist Mark Mathews said. He adds that if consumers have to pay more for goods, they will find savings elsewhere.
Meanwhile, Shopify has forecasted its revenue to grow in the mid-to-high 20 percent range year-over-year in the fourth quarter. "Consumer confidence for us is measured at checkout," Shopify President Harley Finkelstein said. "Shoppers keep buying. They keep returning and demand remains really resilient.”