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14 Apr

Consumers Became More Cautious After SVB Prompted Bank Worries

The patron is showing some signs of wear and tear and tear, having absorbed high inflation, high rates of interest and a touch of bank panic. 

Retail and food service sales growth slowed to only 2.9 percent from a 12 months earlier in March, almost half the 5.9 percent expansion seen in February, based on latest data from the U.S. Census Bureau.

And fashion proved to be a drag, with sales at apparel and accessories specialty stores slipping 1.8 percent 12 months over 12 months while shops logged a 1.2 percent decline.

One brighter spot got here from e-commerce, which remains to be not riding as high because it did through the pandemic, but continued to win share with non-store retailers posting a 12.3 percent gain. 

That is the primary sales reading to reflect spending after the failure of Silicon Valley Bank sparked concerns of one other banking crisis — worries that, no less than for now, have calmed. 

With or without banking troubles, shoppers have plenty on their minds with the economy still recovering post pandemic. 

The most recent reading of the Refinitiv/Ipsos Consumer Sentiment Index — based on a survey fielded from March 24 through April 7 — showed that sentiment fell 0.7 points to 50.7 from a month earlier, returning to levels last seen in September. 

James Diamond, senior research manager at Ipsos, said: “In the primary month for the reason that collapse of Silicon Valley Bank and the following financial instability that ensued, Americans report feeling a bit of less confident in the present economy, breaking a four-month holding pattern. This doubt permeates to Americans’ expectations of the economy six months from now, with the Expectations sub-Index at its lowest point in 4 months.”

Researcher Craig Johnson, president of Customer Growth Partners, said the sales declines in apparel were primarily driven by “an industry-wide decline in conversion rates,” which fell by 2 percent to five percent as fewer individuals who did go to stores decided to purchase. 

“It is a very significant slowdown,” Johnson said. “We haven’t seen that form of decrease for the reason that peak COVID[-19] days.” 

While Johnson said it’s the mid and lower-end shoppers who’re being hit the toughest by the macro economics of the moment, there are other broad trends weighing on apparel sales. 

“A number of women particularly feel they’ve enough clothes. Their wardrobes are full,” said Johnson, who described the thought process as, “I like that outfit, but I actually have three other outfits I haven’t worn.”

Along with “less raw demand for attire,” Johnson said consumers are also continuing to prioritize spending on other hot categories, including beauty and footwear. 

Nevertheless, Matthew Shay, president and chief executive officer of the National Retail Federation, noted that the slowdown in sales in March got here after strong gains earlier within the 12 months. 

“Continued easing of inflation and the general strength of the job market and wages are keeping the basics of the patron economy strong and may support their ability to spend on household priorities through 2023,” Shay said. “Retailers recognize the pressure on consumers from increased prices in services and experiences, and the impact of upper rates of interest, and are prioritizing product mix, competitive pricing and convenience to assist consumers stretch their budgets.”

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