Retail Sales Suggest Consumers Are Still Spending
Retail sales increased in May, showing that consumers continue to spend despite concerns about inflation, housing affordability, and the job market.
At the same time, the Federal Reserve announced that it would leave interest rates unchanged.
Taken together, these developments tell an interesting story.
Consumers are still participating in the economy, but many appear to be making careful choices about where their money goes.
Safe Spending vs. Bold Spending
One way to think about today’s economy is that consumers are engaging in more safe spending than bold spending.
Safe spending might include:
- Buying a few new shirts.
- Going out for dinner with friends.
- Taking a weekend trip.
- Picking up treats for the dog.
- Supporting a favorite local business.
Bold spending often involves larger commitments:
- Buying a new car.
- Purchasing a home.
- Taking on significant debt.
- Making a major renovation.
Many households appear willing to spend on things they enjoy while remaining cautious about large financial commitments.
The Reports Tell a Consistent Story
Over the past week we’ve looked at several economic reports.
Consumers expressed concerns about job security.
Inflation remained elevated.
Businesses reported higher costs.
Homebuilders pulled back on new construction.
The Federal Reserve chose to leave interest rates unchanged.
A common theme emerged from nearly every report:
Caution.
Yet today’s retail sales report suggests consumers have not stopped spending altogether.
Instead, they appear to be making thoughtful decisions about where and how they spend their money.
A Personal Example
I’ve been thinking about purchasing a car, but recent inflation reports make me want to save a little longer and see how things develop.
At the same time, I might still buy a few shirts, enjoy a meal at a local restaurant, or support a favorite small business.
That’s not avoiding spending.
That’s choosing where spending feels comfortable.
I suspect many households are making similar decisions.
The Bottom Line
The economy doesn’t appear to be booming.
It doesn’t appear to be standing still either.
Consumers, businesses, and even the Federal Reserve seem to be taking a careful approach.
Perhaps the best way to describe the current environment is this:
The economy is seeing more safe spending than bold spending.
And for now, that may be enough to keep things moving forward.
This week’s economic reports showed caution from consumers, businesses, homebuilders, and even the Federal Reserve. Yet retail sales suggest Americans are still finding ways to spend on the things that matter most to them. Consumers may not be opening their wallets for every purchase, but they haven’t put them away either.
Additional Resources
U.S. Census Bureau Retail Sales Report
Monthly Advance Retail Sales Report
Federal Reserve Interest Rate Announcement
Federal Open Market Committee Statement
Consumer Price Index (CPI)
Consumer Price Index Report
Producer Price Index (PPI)
Producer Price Index Report
Housing Starts and Building Permits
New Residential Construction Report
Willie and I appreciate every reader.