Consumers are Slowing Their Spending

Posted by Colby Hesson

Tuesday, July 18, 2023

Key Points:

  • Retail sales in June rose 0.2%, a bit softer from the previous revised gain of 0.5%, revealing a tiring consumer.
  • Excluding autos, sales also rose 0.2%, buoyed by another solid gain in electronics and appliance stores.
  • Grocery store sales numbers fell in June for six out of the last seven months, partially reflecting a decline in food prices but also from a decline in consumer demand.
  • Sales for non-store retailers rose roughly 2% in June, the strongest monthly gain in online sales since the end of last year.

The June Retail Sales report reveals a mixed story of consumer spending in the United States. In June, retail sales rose 0.2%, a bit softer than the previous revised gain of 0.5%. This slight slowdown indicates a tired consumer and raises questions about the strength of future spending.

When examining specific measures of the index, non-store retailers stand out with the strongest monthly gain since the end of last year. This is due in part to the surge in online shopping and the convenience it offers consumers. Since the pandemic, there has been a shift in e-commerce sales that is exceeding its trajectory and not slowing down. Compared to the previous year, there has been a 9.4% increase in online sales, showing consumers are not slowing down just yet.

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On the other hand, grocery store sales have experienced a decline in six out of the last seven months. This decrease can be attributed partially to a decline in food prices but also reflects a decline in consumer demand for groceries. It is important to note that this decline in grocery sales is not an indicator of a broader weakness in the retail sector, as other categories have shown growth. Nevertheless, this trend highlights the change in consumer preferences and the potential impact of external factors such as price fluctuations on the grocery industry.

Consumer spending has slowed as sales have begun to fall from January’s high of 2.8%. This month, overall retail sales increased by 0.2%, which was less than expected. This is the third month in a row that sales have increased, although it has been a somewhat miniscule uptick. This shows that customers are continuing to spend on a variety of goods, even though the rate of expenditure has begun to decline. It is worth emphasizing that the reliance on excessive savings and credit to finance spending habits raises worries about the trend’s long-term viability.

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With consumers depleting their excess savings, there has been an increasing reliance on credit to sustain spending levels. This shift suggests consumers may be utilizing credit cards and other forms of borrowing to maintain their prior purchasing power. While this has helped retail activity, it does raise concerns about the sustainability of this trend in the long term. Increased reliance on credit can lead to potential long-term financial challenges for individuals and households. We will need to monitor consumer credit trends, as they can have an impact on future spending patterns and the overall health of the economy.


The current picture of the consumer is a bit blurry. It seems that excess savings buoyed retail activity in recent months, but consumers are quickly depleting those excess reserves and starting to use credit to support their spending habits. Yields on both 2-year and 10-year Treasuries moved a bit following the report, but the sales data do not support any material change in expectations for the next Federal Reserve (Fed) meeting. We expect the Fed to hike by 0.25%, but probably for the last time in this cycle.


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