Recent Inflation Data: Impacts on Consumer Spending Trends

Impact of inflation on household budgets

Inflation is straining household budgets, leading to soft trends in discretionary spending and increased merchandise costs. Companies like Procter & Gamble and Target highlight how higher prices are impacting consumer consumption, while Walmart notes a slight easing in inflation's effects on costs.

"More broadly, there could be additional negative impacts to our net sales, earnings and cash flows should the situation escalate beyond its current scope, including, among other potential impacts, economic recessions in certain neighboring countries or globally due to inflationary pressures and supply chain cost increases or the geographic proximity of the war relative to the rest of Europe." --- (PG, sec filing, 2024/Q1)

"Merchandise costs continued to be impacted by inflation, however at a lower rate than we experienced in recent years." --- (WMT, sec filing, 2025/Q1)

"This normalization, combined with the cumulative impact of higher prices on consumer budgets, is resulting in continued soft trends in discretionary categories, most notably in Home and Hardlines." --- (TGT, earning call, 2025/Q1)

"Gas price inflation positively impacted total reported comp sales by approximately 0.1%." --- (COST, event transcript, 2024/04/10)

"Increased pricing in response to certain inflationary or cost increases may also offset portions of the cost impacts; however, such price increases may negatively impact product consumption." --- (PG, sec filing, 2024/Q4)

Consumer sentiment and spending attitudes

Recent inflation data has led to increased consumer caution, particularly among lower-income groups feeling financial stress. Shoppers are prioritizing lower-priced products and seeking deals, indicating a shift in spending attitudes driven by economic pressures.

"And we talked about the fact that the lower income consumer is feeling a little bit of stress." --- (DIS, earning call, 2024/Q1)

"Consumers being careful with their spend, trading down, looking for lower ASP products, looking for deals." --- (AMZN, earning call, 2024/Q1)

Spending on essentials vs. discretionary items

Recent data indicates a shift in consumer spending, with a notable increase in essentials as companies like Amazon and Walmart report growth in everyday essentials. Conversely, discretionary spending, particularly on big-ticket items, is declining, as seen in Home Depot's results.

"Faster delivery times have another important effect. As we get items to customers this fast, customers choose Amazon to fulfill their shopping needs more frequently, and we can see the results in various areas, including how fast our Everyday Essentials business is growing and the continued increase in Prime member purchase frequency and total spend with us." --- (AMZN, earning call, 2024/Q1)

"But you want to take care of not only the consumables in the grocery side, but when we bring in an item that's a success in Taiwan or Korea or the UK and it creates that excitement for the member, that's when we really have done a good job of triggering that impulsive purchase where members are trusting the buyers and they will add that additional item to their cart." --- (COST, earning call, 2024/Q3)

"Big ticket comp transactions or those over $1,000 were down 5.8%, compared to the second quarter of last year. We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project such as kitchen and bath remodels." --- (HD, earning call, 2024/Q2)

"For example, its owned brand portfolio includes new low-priced basics brand dealworthy, with prices starting at less than $1 and most items under $10, and Target recently relaunched and expanded its everyday essentials brand up&up, which includes more than 2,000 items, most under $15." --- (TGT, press release, 2024/05/20)

"Consumers spend on essential goods and services despite economic uncertainties and inflationary pressures." --- (WMT, press release, 2024/08/21)

Consumer savings and investment behavior

Recent trends indicate that consumers are shifting their savings from checking accounts to certificates of deposit (CDs), reflecting a cautious approach to inflation. Additionally, consumer deposits have increased significantly, suggesting a stabilization in savings behavior, while regulatory oversight aims to enhance financial health and credit protection.

"I think the simplest and best answer to that is not really. So, as we've been saying for a while, migration from checking and savings to CDs is sort of the dominant trend that is driving the increase in weighted average rate paid in the consumer deposit franchise, that continues." --- (JPM, earning call, 2024/Q1)

"A lot of the money has moved. If you look at the seven-day average for consumer, going all the way back to the early part of October, it’s been relatively stable at $950 billion, $960 billion, so we’re just getting through the tax season and the ins and outs in the wealth management business and consumer, people paying taxes out on the wealthier side and receiving benefits on the tax refund side, so as we stabilize in that, we expect it to grow." --- (BAC, earning call, 2024/Q1)

"In the United States, our marketing, sale and servicing of consumer financial products and our compliance with certain federal consumer financial laws are supervised and examined by the Consumer Financial Protection Bureau (CFPB), which has broad rulemaking and enforcement authority over providers of credit, savings and payment services and products and authority to prevent 'unfair, deceptive or abusive' acts or practices." --- (AXP, sec filing, 2024/Q2)

"Additionally, to support the financial health of consumers as part of this program and beyond, the firm is working with behavioral design nonprofit ideas42 to help consumers better protect and improve their credit, including preparing families for homeownership. Advancing Policy Solutions to Increase Homeownership." --- (JPM, press release, 2024/04/08)

"Our deposits are up $100 billion, so it has been a point of conviction of ours that as we get towards Q2, we should see the consumer side begin to stabilize." --- (BAC, earning call, 2024/Q1)

Future outlook on consumer spending trends

The future outlook on consumer spending trends is cautious, influenced by economic uncertainties such as inflation and interest rates. Retailers like Home Depot and Costco highlight risks affecting demand, while Target and Walmart report improvements in traffic and spending, particularly among high-end consumers, suggesting varied responses across income groups.

"In addition, changes in fuel, utility, and food costs, interest rates, and economic outlook may impact customer demand and our ability to forecast consumer spending patterns." --- (AMZN, sec filing, 2024/Q2)

"comment on our updated outlook for fiscal 2024. As you heard from Ted, given the softer-than-expected performance in the first half of the year, and reflecting continued uncertainty around underlying consumer demand, we believe a more cautious outlook for the year is warranted." --- (HD, earning call, 2024/Q2)

"These risks and uncertainties include, but are not limited to, domestic and international economic conditions, including exchange rates, inflation or deflation, the effects of competition and regulation, uncertainties in the financial markets, consumer and small business spending patterns and debt levels, breaches of security or privacy of member or business information, conditions affecting the acquisition, development, ownership or use of real." --- (COST, press release, 2024/07/10)

"And we certainly felt much better about the sequential improvement in traffic, getting back to positive digital growth for the first time in over a year, continued strength in services like Drive Up and categories like Beauty, and a very significant trend line improvement in apparel." --- (TGT, earning call, 2025/Q1)

"Consistent spending across income groups. We've had more growth as we mentioned in the earlier remarks, on the high-end consumer." --- (WMT, earning call, 2025/Q1)

Regional variations in consumer spending

Regional consumer spending is showing notable variations, with the West Coast experiencing early corrections. Companies like Costco report diverse sales growth across regions, while Lowe's highlights affordability challenges affecting housing. Walmart's e-commerce success in international markets, particularly China, further illustrates these regional differences in consumer behavior.

"So we've heard from some other retailers that maybe West Coast sort of started a correction first, both on the consumer side and your regional performance, how would you describe and are you seeing any of that factor?" --- (HD, conference, 2024/04/04)

"As reported in our release, net sales for May came in at $19,640,000,000 an increase of 8.1% from 18.16 $1,000,000,000 last year.Reported comparable sales for May were as follows: in the U. S. 5.8%, in Canada 6.7%, other international 9.3%, total company 6.4%, e commerce 15.3%." --- (COST, event transcript, 2024/06/05)

"I think we're watching consumers continue to digest and adjust to the monetary tightening, which is working its way through the system, and that continues to have an outsized impact on housing where we see affordability challenges and historically low turnover." --- (LOW, earning call, 2025/Q1)

"E-commerce sales in our international markets were up 18%. Customers are responding favorably to the increased convenience as we scale pick-up and delivery capabilities. In China, we increased e-commerce orders delivered within one hour by 28% to 59 million orders." --- (WMT, earning call, 2025/Q2)

"Customers can visit their local Home Depot stores for regionalized deals on products including 2-quart SuperCal petunias, 2-quart Rio Dipladenias, Bonnie 4.5-inch Veggies and Herbs as well as 4-inch Ground Covers.Great Deals for Good Company: From stylish seating options to grills and outdoor décor, customers can create a comfortable and stylish oasis for relaxation and entertainment with significant discounts." --- (HD, press release, 2024/04/02)