Columbus, OH, July 7, 2006--The pace of retail spending should slow in July, according to Retail Forward’s Future Spending Index. The index slipped to 99.0 this month from the 101.3 reading in June.
“As we head into the second half of the year, the economic pressures consumers face are becoming more difficult to ignore,” said Steve Spiwak, an economist with Retail Forward. “In particular, the drag of debts amid rising interest rates is taking a bigger toll on household cash flow. The recent stock market downtrend and concerns about income growth also are crimping the desire to spend.”
This month’s ShopperScape™ results also indicate that the longer-term trend toward fewer shopping trips continues, likely in response to rising gasoline prices and increasing time pressures. This trend is benefiting retailers with a broad offer that enhances one-stop shopping convenience, though favored higher-end retailers may also benefit as many shoppers trade down to make room in budgets to trade up.
Up and Middle Markets To Pull Back
Look for Up and Middle Market households, which account for the vast majority of retail spending, to pull back on the spending reins in July. Down Market households, however, say they plan to spend at a somewhat stronger pace.
• The Future Spending IndexTM for Up Market households (incomes greater than $75,000) declined to 95.5 in July from 97.9 in June. Compared with the prior month, fewer people in this segment reported better income growth. Moreover, assessments of investment worth decreased for the second straight month. An uptick in home buying cushioned the Up Market falloff.
• The index for Middle Market households (incomes between $22,500 and $75,000) decreased from 102.6 in June to 98.0 in July as views of job security and investment performance dimmed. Heightened pessimism about ability to service debts contributed to the decline. Home buying remained buoyant, keeping the index for this cohort from posting a bigger decrease.
• Cash flow among Down Market households (incomes less than $22,500) is being boosted by a pickup income growth and a jump in refinancing activity, which allows homeowners to tap into home equity to fuel spending. This pushed the Down Market Index up to 111.4 in July compared with 106.4 the month before. Still, jitters persist regarding job market security and investment worth, which should restrain any improvement in Down Market spending this month.
Shopping Habits Continue to Evolve
ShopperScape™ findings this month show that most shoppers have changed their shopping habits during the past year. Unfortunately for retailers, the change in shopping behavior most likely means they are shopping less often. This information is consistent with the trend in shopping at fewer stores within many lines of trade, which Retail Forward’s ShopperScape™ has recorded in recent years.
• Overall, 59% of all primary household shoppers reported that their shopping habits have changed over the last year. This compares to 65% the same time last year.
