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US Retail Spending Slows as Inflation Starts To Affect Americans

US retail spending is slowing as inflation takes its toll on everyday Americans. In February, Americans slowed their spending on gadgets, home furnishings, and other discretionary items. This is as prices for food, gas, and housing continue to rise.

What you Need To Know

  • Spending only increased by .3% in February
  • The National Retail Federation predicts growth in retail sales will decrease by 6-8% this year.
  • The supply chain is further complicated by the Russian Invasion of Ukraine and a new COVID-19 surge in China

According to ABC News, January saw a rise in spending, but February saw it slow. Spending is still on the rise, but barely. From December to January, retail sales experienced a solid 4.9% jump. But in February, spending only increased by .3%.

The 4.9% jump in January was the largest since last March when Americans got their stimulus checks.

Early this month, the Labor Department reported that consumer inflation, which is propelled by a rising cost in gas, food, and housing, has jumped 7.9% over the past year. That’s the sharpest spike since 1982.

It appears the slowing of retail spending is just beginning. Due to the uncertainty of today’s economy, the National Retail Federation predicts growth in retail sales will slow by 6-8% this year. This follows 2021’s record-breaking growth.

Surging prices on essentials, such as gas, food, and housing, make it harder for households to shop retail and prompts them to limit their spending. So even if the cost of retail goods doesn’t increase, inflation will still see that part of the economy hit.

New Pressures Could Send Prices Even Higher as Retail Spending Slows

The Russian Invasion of Ukraine and the subsequent U.S sanctions on the country puts further strain on the economy. Many western companies including retailers like Nike, H&M, and Canada Goose have suspended operations in Russia. The invasion of Ukraine, which began on February 24th, has caused a large-scale humanitarian crisis and thus prompted hundreds of companies to suspend operations there.

Many retailers fear that the war will hurt the supply chain and cause shortages. Supplies of wheat and Oil are reportedly already showing warning signs. Additionally, a new COVID-19 wave in China will also hurt the supply chain. How big of a crunch this will cause is unknown. And it’s hard to tell how long either of these situations will continue.

“The problem is that as households get more and more squeezed on essentials, there is less budget available for discretionary spending,” Managing director at GlobalData Retail Neil Saunders, told ABC. “True, there is an elevated buffer of savings which consumers can call upon to fund their consumption, but this is a short-term fix in an environment where inflation is becoming a persistent problem.”