As Black Friday looms, the US economy faces intriguing shifts, especially among wealthier consumers who traditionally steer significant portions of consumer spending. In the three months preceding the pivotal holiday shopping season, retailers targeting the upper middle class, including major players like Apple, Coach, and Nordstrom, experienced a concerning sales dip— the most significant in two years. This dip raises red flags about the broader economy, heavily reliant on robust consumer spending to ward off a recession.
Bloomberg’s exclusive analysis of Second Measure data reveals a decline in sales for these affluent-focused retailers, signifying a change in spending habits among households with at least $100,000 in income. Despite record interest rates and surging inflation, this demographic, previously a driving force in the economy, is adopting a more cautious approach.
An affluence index, crafted by Bloomberg and covering 30 large retailers and brands across various categories like clothing, jewelry, and electronics, indicates a sales deterioration since January. The data, tracking credit and debit card transactions, unveils that sales for the August to October period declined at 70% of these companies, with a median change reflecting a 14% drop—the most substantial decline in two years.
While overall retail sales figures have demonstrated year-over-year growth since the pandemic, the weakening spending patterns among the upper middle class, known for swift cutbacks in uncertain times, could hint at challenges for the broader US economy.
Shopping mall foot traffic in affluent areas is also on the decline, a stark contrast to headline US retail sales numbers. Placer.ai mobility data reveals a drop in visits to top shopping centers in 25 states, with 21 out of 25 destinations posting declines in foot traffic in October. Overall visits decreased by 3.3% for the latest three-month period, marking the poorest performance since early 2021.
This economic softness extends even to regions experiencing post-pandemic population growth. Malls in prosperous areas, like on the outskirts of Houston, are witnessing a decline in foot traffic, signaling potential challenges in high-income consumer behavior.
Factors contributing to this economic caution among wealthier Americans include concerns about job security, rising interest rates, and high inflation. As a result, consumers are scaling back on significant purchases, impacting industries from retail to healthcare and automotive. Companies like Harley-Davidson and Revolve Group are already feeling the effects, with consumers delaying or avoiding discretionary purchases amid economic uncertainties.
The upcoming Black Friday and holiday shopping season will serve as a crucial litmus test for the resilience of the US economy, with spending behaviors among affluent consumers potentially foreshadowing economic trends. As consumers tighten their belts, the economic landscape presents nuances and challenges that require meticulous attention in the months ahead. Stay tuned for insights into the economic pulse as we navigate these intriguing shifts.
