Jodi's Journal: A Sign of the Consumer Spending Times?
Jodi Schwan (4 hours ago)
I saw the sign, stopped, and thought: "That’s a story."
The story wasn’t just about gas prices—which are at their highest for the year—but the timing, coupled with growing concern about consumers' financial strain as the holiday season approaches.
Over time, I've developed some unofficial national indicators to gauge consumer behavior: Walmart, McDonald's, and Home Depot foot traffic. When people start frequenting these places again or stop going, it tells me a lot.
This week marks Walmart’s Fall Deals event, timed with Amazon’s Prime Big Deal Days, highlighting the current emphasis on value. In late August, Walmart reported sluggish U.S. comparable sales growth of 2.6% and smaller average spending per transaction. The company also foresees substantial fuel-related costs exceeding initial expectations.
McDonald's shares have declined for eight consecutive weeks, trading at four-year lows, while CEO Chris Kempczinski expresses pessimism about the future: "We’re not expecting things to change."
At Home Depot, CFO Richard McPhail discussed consumer sentiment at the Goldman Sachs Global Consumer and Retail Conference. He noted that while consumers have the means to spend, uncertainty around inflation, interest rates, fuel prices, and job security is holding them back from significant purchases. "They’re not yet ready to unleash... spending into large projects," he said.
Despite these challenges, Sioux Falls' consumer has shown resilience this year, with sales tax revenue exceeding projections. As the fourth quarter begins, $4-per-gallon gasoline could be a tipping point, impacting spending behavior even more psychologically than financially.
Holiday spending forecasts look decent, according to Deloitte (4% - 4.8% growth) and Mastercard (5.5% growth). However, Mastercard attributes much of this increase to inflation rather than increased purchasing volume. The race for deals is already on, with online shopping leading the way.