After benefiting from a pandemic-era boost in spending and consumption, retail sector fundamentals began to waiver during the second half of 2022. Investors inched into 2023 cautiously, but several critical retail growth metrics have continued to trend positively early this year.
Above all, consumer spending continues to defy the damnation of inflation. According to the Bureau of Economic Analysis, personal outlays increased by $312.5 billion in January, growing by 1.8% from December and 8.4% over the last 12 months. As consumption normalizes from sky-high 2021 growth levels, it’s been tempting to view the reversion as an impending headwind for retail. Yet, if inflation’s downtrend continues without significant pain to labor markets, today’s expenditure levels may represent a new equilibrium for consumer spending.
Since monetary policy tightening began in March 2022, consumer spending has grown at an average of 8.4% year-over-year, well above the 4.2% average rate reached during the Fed’s last tightening cycle before the pandemic.
But without a doubt, retail is changing. Large brick and mortar stores like Bed, Bath and Beyond have gone bankrupt. The hospitality profile has shrunk with many operators going to automated, self-serve models.
In this changing environment, SVN Vanguard can provide you needed guidance and advice to navigate the retail sector.