Due to inflation, US consumers spend more but take care of their money

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Due to inflation, US consumers spend more but take care of their money


American consumers shop at the Safeway supermarket in Annapolis, eastern Maryland, on May 16, 2022. afp_tickers

This content was published on May 17, 2022 – 16:27

(AFP)

Consumer spending continues to rise in the United States, as shown by results from Walmart and Home Depot stores, as well as official retail sales data, driven by rising prices and prompting some habit changes.

The turnover of the supermarket giant Walmart grew 2.4% to 141.6 billion dollars in the moving quarter that runs from February to April.

In the United States, however, customers bought fewer non-food products, a phenomenon that the group attributes to the expiration of the exceptional aid provided by the government to the population during the pandemic.

For Neil Saunders, from the Global Data consultancy, this decrease is explained because Walmart’s clientele “tend to be more sensitive to price increases, and were more affected by strong inflation”, which in April remained at highs in 40 years in the United States, at 8.3% per year.

Expenditures on food, on the other hand, increased.

It’s that with inflation, “more consumers turned to Walmart to cut costs,” Saunders said.

The group’s chief financial officer, Brett Biggs, noted in a conference call that customer behaviors vary widely.

The company sold more than some quite expensive items like video game consoles, patio furniture or grills.

But some consumers, at the same time, bought less expensive brands of grocery items like meat or dairy.

Meanwhile, home improvement chain Home Depot, which made big bucks during the pandemic as Americans upgraded their homes during lockdowns, remains in good health, with revenue up 4% between February and April to 38,900. millions of dollars.

A sign of the effect of inflation, the number of purchases made in its stores fell, but the average amount spent by its customers increased 11%.

Another sign of the increase in consumer spending in the United States: the Department of Commerce reported an increase of 0.9% in retail sales in April compared to March, and 8.2% compared to April of the year last.

– Balancing less sales with costs –

In the coming months “consumers’ tolerance for high inflation will be put to the test and the new spike in gasoline prices (ndlr: at historical records), combined with the adjustment of financial conditions, will weigh on the will of families to spend more for expensive items,” said Lydia Boussour, an economist at Oxford Economics.

“But solid fundamentals, in particular robust job income growth and accumulated savings, will continue to support consumer spending,” it added.

Meanwhile, price increases affect the profits of companies such as Walmart, whose shares have fallen since morning on Wall Street, more than 9%.

The net income of the supermarket chain fell in this context 25% over the same period of the previous year, to 2,050 million dollars, and the company reduced its profit forecast for the entire fiscal year.

The result is “disappointing”, recognized the general director of the group, Doug McMillon, who explained the decrease in profits due to the increase in salary costs.

“We hired more employees at the end of the year to replace those who were on sick leave,” but with the decline in covid cases in February, “we found ourselves for weeks with more employees than necessary,” he explained.

With the drop in sales of non-food products, the group’s inventories increased and with it the storage costs. Fuel costs to transport products also increased.

For Home Depot, net profit (+2%) trailed sales somewhat but the group still raised its full-year sales forecast and the stock was up 2%.

“We are entering a more difficult period for retail” but “the landing seems to be taking place quietly, at least on the demand side,” said Neil Saunder.

“The biggest challenge for chain stores now will be balancing a decline in their sales volume with higher costs,” he concluded.

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