Consumer spending accounts for nearly 70% of U.S. economic activity, and Americans have remained resilient ever since inflation first spiked almost 18 months ago
. Cracks have begun to show, however, as higher prices for basic necessities take up an increasingly large share of everyone’s take-home pay.
Inflation has retreated from the four-decade high it reached this summer, but it’s still sapping the spending power of consumers. Prices roseOverall spending has slowed from the pandemic-infused splurges and shifted increasingly toward necessities like food, while spending on electronics, furniture, new clothes and other non-necessities has faded. Many shoppers been trading down to private label goods, which are typically less expensive than national brands.
Consumers also waited for deals. Stores expected more procrastinators to hit stores in the last few days before Christmas compared with a year ago when people began shopping earlier due to a global disruption of the supply chain that created thousands of product shortages. “Consumers are trying to spread out their budget, and they are evaluating and shopping at different stores,” said Katie Thompson, the lead of consultancy Kearney’s Consumer Institute.
In November, shoppers cut back sharply on retail spending compared with the previous month. Retail sales fell
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