The Inflationary Mood of Wary Consumers – WWD

The bundle of raw nerve endings that the American consumer is in 2022 doesn’t seem to know which way to turn.

If it’s not the Omicron variant that’s forcing people to stay low, it’s a massive supply chain-driven inflation rush that makes them pay more.

As Omicron fades (fingers crossed), inflation will remain an urgent concern and especially for low-income consumers, but it’s a problem for everyone as the world limps into the third year of the coronavirus pandemic.

The University of Michigan Buyer Sentiment Indicator, closely followed by Surveys of Consumers, fell 2.5% to 68.8 this month for its second lowest reading in a decade (the lowest point, 67.4, was set in November).

The Sentiment Index averaged 70.3% over the past six months, down from 82.9 in the first half of 2021.

Richard Curtin, chief economist at Surveys of Consumers, said: “While the Delta and Omicron variants certainly contributed to this downward shift, the decline was also due to a rising inflation rate. Three-quarters of consumers in early January ranked inflation, relative to unemployment, as the most serious problem facing the nation. “

In fact, the nation is near or close to what is considered full employment, with an unemployment rate of 3.9 percent (although that picture is confused with some workers sitting on the sidelines for a variety of reasons, health at the best work-life balance and more).

In any case, there are jobs. But the pay doesn’t go that far with low-income families, who have to devote a larger percentage of their earnings to higher food bills and energy costs.

This income gap was particularly evident when reading consumer sentiment.

“As the impact of inflation is regressive, the Sentiment Index fell 9.4% among households with a total income of less than $ 100,000 in early January, but increased by 5.7% among households. with an income above that amount, “Curtin said.

“The same split was observed for the outlook for the national economy, with lower-income households being more negative and higher-income households having more positive outlooks,” he said. “Even among the most optimistic, they are still more likely to forecast negative rather than positive economic times in the coming year.”

The consumer has so far weathered the pandemic extraordinarily well, recovering from the initial blow and spending solidly (with the help of government stimulus) as they adjust to the new reality.

But the new reality – so far – has become a model of holding as the pandemic develops.

Consumers have made a big push for the holidays, but now that may be over with prices going up on almost everything, the stimulus jumped and interest rates are set to go up to fight even more inflation.

After last year’s record increase in sales, there were signs of a decline in momentum last month with people shopping earlier to make sure they could get their gifts and Omicron catching on.

Total sales of retail and restaurant services in December fell seasonally adjusted 1.9% from November, when economists were looking for monthly sales to remain stable. Compared to a year earlier, sales were up 16.9%, according to the Census Bureau.

December sales in clothing and accessories stores decreased 3.1% from November, but increased 29.5% from the previous year. Department stores were down 7% from November and up 22.5% from a year ago.

Ecommerce also returned something at the end of the year, with non-store retailers posting a seasonally adjusted 8.7% decline from November, but a 10.7% increase from the previous year. .

While the cross currents are hard to read, it sure looks like the industry has gone from the somewhat odd boom seen in 2021 and into something else.

The question is what exactly it is.

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