Jharonne Martis, Director Of Consumer Research At LSEG explains why the consumer is showing signs of strain despite higher retail sales.
Transcript:
CAROLINE WOODS: Okay I am joined by Jharonne Martis, director of consumer research at LSEG. Jharonne, great to have you. Good to be here, Caroline. So we’re talking retail sales. They largely came in better than expected. Fill us in on the key takeaway.
JHARONNE MARTIS: June definitely came in stronger than expected as the summer hit and families are out and about eating at restaurants. Still, when you dissect those numbers, you can see that there’s some negative around consumer electronics, appliances and home furnishings. Most of those which are imported and therefore underline that there’s still some tariff related stress. And when you look at the overall graph for retail sales for this year, you can see that there’s a lot of volatility. It’s been a very dramatic year in terms of retail sales ups and downs, which are very much tied with how consumers are feeling about the economy. In fact, when you look at our data for consumer sentiment, you see that it’s been a very turbulent year for consumers when it comes to how they feel about the current economic situation and the investment climate there. We’ve seen some improvements. However, their perceptions about future economic conditions, those continue to deteriorate. Consumers are very much worried about what are going to be the prices that they’re going to be paying, and so are retailers. One thing that we’ve talked about, and I think we’ve talked about it often, though, is that there’s a difference between how consumers feel and what they do. They might feel down, but they might still spend.
CAROLINE WOODS: So how would you rate the strength of the consumer?
JHARONNE MARTIS: Right now, the consumer is only searching for value oriented deals. And this is mainly because they are dealing with very high inflationary prices. As you saw, the inflation data this week shows that prices they’re still dealing with high electronics, electricity, medical care, and things of that nature. And therefore, when they go out shopping, they are actually looking for a discount or promotion deals in order to shop. Still, what’s very heavy on their mind is like, what’s going to happen in the future, right now, because they’re spending like, as you said, there’s a dichotomy, and that’s mainly because they are currently employed. The employment market continues to be very strong. So as long as the consumer is gainfully employed and the unemployment number doesn’t continue to rise, then they’re going to continue to spend freely. But if that number deteriorates, that’s when we’re going to see them put their hands in their pockets and hold back on spending.
CAROLINE WOODS: And one thing I think that’s important to note is that the retail sales data isn’t adjusted for inflation. So it’s not just that consumers are buying more. They might just be spending more too.
JHARONNE MARTIS: So the data that we’ve seen could also be inflated because of those inflationary prices. More because and not so much. So because of the volume of what consumers are actually spending. That is correct.
CAROLINE WOODS: You mentioned in the CPI report that we started to see some higher prices in certain areas, also in things like furniture and clothing. What is the consensus. How many retailers have actually pushed those higher prices from tariffs onto the consumer. How many are expected to.
JHARONNE MARTIS: So so far as of, we’ve been tracking it in a collaboration with centric market intelligence, and actually up until the month of June, the prices in apparel have been down, which actually does. It does explain why we saw a splurge in apparel sales in the month of June, because as long as those prices continue to be down, we’re going to continue to see the consumer spend in that area. However, going into July and August, that could be a different picture, mainly because that’s when a lot of those other tariffs will be hitting. But Yes, when it comes to expenditure, right now, we’re seeing that the biggest winners, even for the rest of the year, are going to be the discounters because consumers will be looking for those value oriented prices. TJX off price retailers are expected to do very well during the back to school season as kids go back to school.
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