Columbus, OH, August 4, 2006 - Retail Forward's Future Spending Index projects weaker growth in the month ahead. The index declined to 93.2 in August from 99.0 in July.
"Weaker job gains, a volatile job market and higher home cooling bills are creating heightened uncertainty among consumers," said Steve Spiwak, an economist with Retail Forward. "Also, consumer angst has been boosted by the housing market slowdown, which is sapping some demand across all the key income segments."
Although the outlook is softer overall, parents won't be skimping on the kids with the new school year around the corner. This month's ShopperScape results indicate that back-to-school spending should clock a solid gain over last year. Still, parents will be seeking bargains, which should benefit discounters such as Wal-Mart and Target the most.
All three of the key income groups indicate they will spend at a reduced pace in August. Slipping investment worth and higher debts are discouraging spending among Upper and Middle Market households, while Down Market shoppers are more worried about job prospects.
The Future Spending Index for Middle Market households (incomes of $22,500 to $75,000).decreased from 98.0 in July to 94.2 in August. These households on average reported that credit card and mortgage debts have become more difficult to service. Moreover, investment gains have softened and home buying in this segment continued the downtrend from last summer's peak.
The index for Down Market households (incomes of $22,500 or less) slipped to 101.5 in August from 111.4 the month before. Job and income worries are weighing more heavily on this cohort. Steeper debt payments and a moderation in home buying also are playing a factor in the dimmer outlook for Down Market shoppers.
Up Market households (incomes of $75,000 or greater) are expressing greater concern over rising debt burdens and a drop off in investment worth, which is an important driver of spending among affluent households. As with the other income segments, home buying continued to drift lower for Up Market households, which should dampen spending in the near term.
Before the the last weekend of July, back-to-school shoppers had only spent an estimated 13% of their back-to-school budgets, which are expected to average an estimated $440 per household that is spending on back-to-school items this year. This represents a healthy increase of 7% from last year's estimated $410 average back-to-school spending. As usual, clothing is the largest dollar volume category.
Back-to-school shoppers estimate that they either have spent or will spend an average of $150 on clothing. The next-largest spending category is computers, averaging $73. Shoes ($55), books ($52) and school supplies ($46) also represent large spending categories.
Members of the three income segments are about equally tardy in their back-to-school spending.
A larger percentage of Up Market shoppers plan to make future back-to-school purchases than Down or Middle Market shoppers.
Forty-three percent of Up Market shoppers still plan to buy back-to-school items compared to 33% of Middle Market shoppers and 34% of Down Market shoppers.
Up Market shoppers who had purchased back-to-school items by the end of July report spending $458 on average, compared to Middle Market shoppers spending $331 and Down Market shoppers spending $292 on average.
Up Market shoppers who plan to purchase back-to-school items in the future anticipate spending $620 on average compared to Middle Market shoppers spending $450 and Down Market shoppers spending $368 on average.
Overall spending for the back-to-school seasons ranges from $572 on average among Up Market shoppers to $410 among Middle Market shoppers and $344 among Down Market shoppers.
