Listen to the article
U.S. consumers kept buying discretionary goods in August — as they have all year — but signs indicate they’ll be tough customers at the holidays.
Last month, retail sales rose 5.5% in the segments covered by Retail Dive, fueled in part by back-to-school shopping. Electronics sales rose 2.6%; sporting goods 4.4%; and apparel soared 7.6%. Even home goods sales rose nearly 3%.
Some of that was likely early spending that could lower next month’s results, according to Fitch Ratings Senior Director David Silverman. But August’s headline number is undermined by elevated prices from tariffs, as volumes barely rose, according to Wells Fargo and GlobalData research. For the four weeks ending Aug. 30, unit sales were flat or down across all retail segments, according to Circana.
For the back-to-school period, the picture is even worse: For the eight weeks ending Aug. 30, dollar sales fell 1% year over year and unit sales fell 3%, Circana found.
“Both the overall and core numbers are respectable and show little sign of a consumer in major distress,” GlobalData Managing Director Neil Saunders said in emailed comments. “However, the volume numbers and some of the underlying metrics we track – such as shopping around and consideration times – do indicate that greater caution is starting to come through and that consumers are being very considered and deliberate about their spending.”
Inflation and employment are on people’s minds. Consumer sentiment slipped for the second straight month over concerns about job security, prices, tariffs and prospects for U.S. businesses, according to research Friday from the University of Michigan. Unemployment has indeed ticked up, while companies have slowed their hiring, a double risk to the economy, according to UBS economists.
Right around the holidays, inventory affected by tariffs will be hitting shelves, and that is likely to weaken sales, according to Fitch. Just 22% of shoppers plan to spend more at the holidays than they did last year, according to an Experian survey released Tuesday.
“We believe keys to success remain a sharp understanding of a retail brand’s relationship with consumers, good negotiating positions with vendors, and a strong balance sheet and cash flow profile to withstand near term volatility,” Silverman said.
Another is a better understanding of consumers’ approach to seasonal shopping these days, according to Marshal Cohen, chief retail industry adviser for Circana. In particular, the season is longer for shoppers than for many retailers, he said.
“Consumers are charting their own spending path and changing the way retail seasons are measured. There is a new cadence to shopping that goes beyond traditional retail calendars or seasons,” he said. “Instead, shifts in consumer lifestyle, shopping behavior, and media influence are behind today’s retail performance – a dynamic that marketers need to prepare for through the 2025 holiday shopping season and beyond.”