A kind of cognitive dissonance has settled over retail — and the consumer.
Wall Street is way up and hitting new highs, but so are gas prices as the war with Iran lingers.
Retail earnings have been strong, but the outlooks aren’t what they could be.
And inflation has sales on the rise, but despite that show of spending stamina, consumers are only feeling worse.
Much worse, according to the University of Michigan’s Surveys of Consumers.
The closely watched study of consumer confidence, which goes back to 1952, hit its lowest-ever reading this month, sinking below the depths during the pandemic, The Great Recession, the 1970s oil crisis, the Vietnam War and everything else.
Just over the past year, consumer confidence has fallen 14.2 percent, leaving the Michigan index at 49.8 — less than half the baseline 100 set in 1966.
“The cost of living continues to be a first-order concern, with 57 percent of consumers spontaneously mentioning that high prices were eroding their personal finances, up from 50 percent last month,” said Joanne Hsu, director of the Surveys of Consumers, in a statement.
Critics have long complained about broad readings of consumer confidence that try to divine the national mood and relate it as a single number when shoppers come in all shapes and sizes.
But there is some evidence that the bad consumer juju is starting to translate into actions.
The National Foundation for Credit Counseling’s first-quarter Financial Stress Forecast found “a significant surge” in consumers reaching out for nonprofit credit counseling.
Mike Croxson, chief executive officer of the foundation, called it a “canary in the coal mine.”
“It tells us that the pressure from sustained credit reliance and affordability challenges has reached a tipping point,” he said. “Consumers want to manage their obligations responsibly, but their traditional capacity to do so is evaporating under current market conditions.”
Core retail sales grew by 4.6 percent in April, excluding automotive, food service and gasoline, a category that jumped 20.9 percent. But those numbers are all juiced up by inflation.
GlobalData pegged the unit increase in core sales at 1.2 percent last month — growth, but not the much stronger growth suggested by the overall gains.
For a year or more, retail CEOs have been walking the fine line of talking up their businesses while also taking a cautious tack on the future, emphasizing how they’re controlling the controllables.
Michael Fiddelke, CEO of Target Corp., had some long-looked-for signs that his turnaround efforts were gaining traction in the first quarter, but sounded a “cautious” note on the retail environment to analysts last week.
“With consumers weighing multiple headwinds and tailwinds and recent dips in consumer sentiment, we continue to place a premium on flexibility, not wanting to swing too hard too quickly despite the early signs of momentum we’re seeing,” Fiddelke said. “We like our business model when we’re needing to chase inventory in the face of stronger-than-planned sales much more than when we find ourselves needing to cancel purchase orders or mark down excess inventory.”
Then again, what you see might depend on where you sit.
Nicolas Bos, group CEO of Compagnie Financière Richemont, also addressed investors last week and said, “In the U.S., I think our activities are very much linked to consumer confidence. I think that there is quite a high level of consumer confidence in the U.S. When you’re over there, you feel a very positive feeling. That translates into a very good level of sales.
“It’s true that there’s probably been a refocus, it cycles, obviously, but a refocus toward jewelry, watches, more iconic products with a long-term value, compared to probably more fashion and accessories in the U.S.,” he said. “We see that clearly.”
So little else is clear, or at least not in focus as the consumer and the world ping-pong back and forth between it all — from their growing credit card balances to politics to AI, the SpaceX initial public offering and everything else.
“The consumer is on the back burner in the context of AI transformations and geopolitics,” said Katie Thomas, who leads the Kearney Consumer Institute and puts together its Consumer Stress Index, in an interview.
“The main metric I watch for is job security,” Thomas said. “What we haven’t seen yet, even with AI, is job losses. When you think of traditional pullbacks in spend, it’s because people literally aren’t working or they’re nervous they’re going to lose their job. The job market’s a little spotty, but the numbers are not what you’ve seen in a recession. That’s what’s allowed people to continue to spend.”
If a steady paycheck is what allows people to spend, it might be the chaos of all of these competing trends that prompts shoppers to actually make a purchase.
“What I hear from consumers, in the reality of their day-to-day is spending, is a sense of control, a sense of normalcy,” Thomas said. “It brings them joy. It really is retail therapy. It’s like, ‘There’s so much going on, but I’m going to go to the mall. I’m going to spend some money.’”
