Jun 15, 2022 - Economy

America's spending shift

Illustration of Benjamin Franklin from a hundred dollar bill peaking out from behind an "open" American flag

Illustration: Sarah Grillo/Axios

It's becoming clear what Americans are cutting back on as energy and food costs cut into their budgets: durable goods.

What's new: The story of the economy is spelled out in today's retail sales report, which showed overall sales down 0.3% in May. Excluding spending at gas stations, retail sales were down 0.7%.

Why it matters: A rebalancing of spending is what economists have been wanting to see — but if that spending is just going toward higher gas bills, people aren't ending up better off.

By the numbers: Through the first five months of the year, sales at gas stations are up 39% and at restaurants up 24%, according to the latest Census Bureau numbers.

  • Meanwhile, sales at furniture and home furnishings stores were up 2.5%, sporting goods sales were up 1%, and sales were down 1.8% at electronics and appliance stores.

Between the lines: Durable goods spending was pulled forward when the pandemic hit. Armed with stimulus checks and pent-up savings, consumers splurged on new televisions, grills, refrigerators and more — bigger-ticket purchases that need only happen once every few years.

State of play: What's happening with durable goods is a tug-of-war between lack of supply and slowing demand. A drop-off in auto sales last month appears to have resulted in a significant lack of vehicle inventory, driven by a shortage of components. But analysts say falling demand is playing a role, too, as decades-high inflation weighs on consumer pockets.

  • What they're saying: "With consumer sentiment low, household finances under stress, and new-vehicle supply still historically tight, the question is: Does the automobile market have a demand or supply problem? [We're] beginning to believe the answer to that question is, 'Yes,'" analysts at Cox Automotive wrote in a note on Wednesday.

The bottom line: When energy prices soar as much as they have in 2022, somebody is going to get squeezed. It's looking like sellers of big-ticket home goods are that somebody.

Disclosure note: Cox Automotive's parent company, Cox Enterprises, is an investor in Axios.

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