“We’re seeing increasing dependency on credit”: Flat retail sales are just the beginning. Consumers fear rising prices and an impending recession.


By Quentin Fottrell

As people tighten their wallets over the holiday season, economists say it makes the prospect of a 2022 recession even more likely

The American consumer wants to know what’s next.

Sales at retailers fell in September, the government said on Friday, a sign the economy could slow in the coming months as consumers emerge from the pandemic-era amid 40 years of high inflation and the end of government stimulus programs withdraw their expenses. Retail sales, a major part of consumer spending, are closely watched as a sign of consumers’ mindset and financial health. They increased by 8.2% year-on-year.

If people continue to tighten their wallets well into the holiday season, it will make the prospect of a 2022 recession even more likely, economists say. Retail sales are expected to rise 0.3% in September, according to economists polled by the Wall Street Journal. Excluding auto dealers, revenue rose 0.3%. Auto sales can skew overall retail spending patterns.

Americans, finally regaining momentum after two years of a global pandemic, are understandably nervous about the economy and their own finances. The 2022 stock market plunge caught many people — and some analysts — by surprise, and nervous consumers are waiting for the other shoe to fall. With so many stressful events, more shoppers are sticking to the essentials, say economists.

Retail stores are obviously concerned about holiday shopping and the mindset of US consumers, and they’re attracting holiday shoppers earlier this year, said Ted Rossman, senior industry analyst at Bankrate.com. “This week Amazon (AMZN), Target (TGT), Walmart (WMT) and others launched their vacation deals,” he said. He said the next month will show more evidence of the early Christmas sales.

But people pay for inflation. Revolving loans such as credit cards rose 18.1% to $1.15 trillion in August after rising 11.7% the previous month, according to data released this month by the US Federal Reserve. Non-revolving loans, typically auto and student loans, rose 5.1% to $3.53 trillion, down slightly from a 5.2% gain in July. This category of credit is much less volatile.

While the majority of Americans (53%) are still positive about their personal finances, that percentage has fallen 11 percentage points over the past two years, according to a report released this week by life insurance company Primerica. Additionally, three-quarters (75%) say their income is lagging behind cost-of-living increases, while 22% believe they will be financially better off in a year’s time.

“We are seeing an increasing reliance on credit as many middle-income families report that their credit card debt has increased recently,” said Glenn Williams, CEO of Primerica, of the survey results. “The financial stress caused by rising credit card balances is also causing more families than ever to make minimum payments on their credit cards.”

Primerica’s Middle Monitor Financial Security Monitor is a quarterly national survey designed to monitor the financial health of people with annual household incomes of $30,000 to $100,000. More than a third (37%) of 1,546 respondents said they are taking on more credit card debt, a six-point increase since the June survey and the highest number since quarterly data collection began.

People aren’t just looking for bargains and switching grocery stores. Many are staying at home and avoiding the “buy now” button altogether. The latest data from the Financial Health Network, a Chicago nonprofit, found that people’s financial health was deteriorating for the first time in the project’s five-year history, pointing to the end of pandemic-era benefits, inflation and stock market volatility.

Stimulus checks, improved child tax credits, rent and student loan moratoriums, and other programs have helped people through the first two years of the coronavirus pandemic. Child poverty fell to a record low in the past year, the Census Bureau said last month. The child tax credit alone lifted 5.3 million people out of poverty, including 2.9 million children, the researchers said

Still, people seem more willing to shop from the comfort of their own homes. “Non-store retailers — basically the Census Bureau’s term for e-commerce stores — outperform most retail sectors,” Rossman said. “Their annual sales increase of 11.6% was second only to the 20.6% increase in service stations, almost entirely due to higher gas prices. The growth of e-commerce is a more positive story.”

-Quentin Fottrell


(ENDS) Dow Jones Newswires

10/15/22 1623ET

Copyright (c) 2022 Dow Jones & Company, Inc.


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