After a surprisingly strong start to the year, persistently high inflation and uncertainty regarding forthcoming interest rate hikes resulted in Americans scaling back their spending in February, according to the United States Census Bureau.
Inflation rose 6% this February compared to February 2022 as Americans decreased their spending by 0.4%, according to the U.S. Census Bureau. Wage gains have trended lower since last year, which may lead to lower spending in the future as well, according to The Wall Street Journal.
Consumers have prioritized purchasing food and essentials over discretionary spending as inflation impacts their budgets, according to the WSJ. As a result, stores like Best Buy and Macy’s have forecasted declines in sales this year while stores like Walmart and Target will be bolstered.
Food prices increased 9.5% in February compared to February 2022, the BLS reported. Additionally, the cost of energy increased by 5.2%, while the cost of electricity went up 12.9%. (RELATED: Regulators Shut Down Silicon Valley Bank After Stock Collapses)
Williamston, Michigan, on February 8, 2023. – Due to the ongoing egg shortage and the rise in prices due to avian flu, some people in the US are turning to local farms and backyard operations to purchase their eggs. (Photo by MATTHEW HATCHER/AFP via Getty Images)
Even wealthier people have been impacted. In recent months, Kroger’s supermarkets have gained more customers from higher-income households as people cut back on dining out or switch from more expensive retailers, CEO Rodney McMullen said in a conference call, according to the WSJ. “They are behaving as if they are already in a recession,” McMullen said.
Following the collapses of Silicon Valley Bank and Signature Bank, there is even more uncertainty about what the Fed will do with interest rates. Previously, economists expected an increase of 25 or even 50 basis points, but now it is possible the Fed will not hike interest rates at all, chief U.S. economist at NatWest Markets Kevin Cummins told CNBC.
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