The U.S. inflation rate continues to moderate, with May’s number clocking in at 4.0% on a year-to-year basis. That’s down from 4.9% in April.
Yet inflation doesn’t look like it’s falling fast enough to save the holidays for retailers -- or maybe even the summer shopping season.
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That’s the take from a new study tracking the mood of U.S. retailers these days.
The data from the most recent CNBC Supply Chain Survey pointed to multiple negative issues on the retail management front.
At the top of the list are huge inventories that are forcing retailers to move store products at a steep discount, a trend that dates back to last year when Walmart and Target surprised analysts with excess inventories that forced the big box titans to significantly mark down prices.
That scenario has spread throughout the retail sector in 2023, with 43% of report participants saying they expect to spend less on new inventory going forward this year.
Having to unload inventory is forcing retailers' hands, as 67% of survey sources say they “expect” consumers to be eagerly looking for steep discounts and as more than half of new inventory orders are expected to be promotional items with many products used as free gifts to attract more customers.
"Clearly, inventory and inflation concerns remain top of mind for apparel and footwear executives as we enter peak shipping season," said Stephen Lamar, president, and CEO of the American Apparel & Footwear Association, which participated in the CNBC survey.
The holiday shopping looks especially bleak, with 71% of study participants “concerned” U.S. shoppers will curb spending in the last quarter of 2023 as inflation continues to take a healthy bite out of the household budget.
The good news is that retail groups say that while the U.S. economy has absorbed a heavy blow, a recession is not on the horizon.
“(The data) suggests that GDP likely overstates U.S. economic growth and that higher interest rates, tighter credit, and persistent inflation are having more of a concerted effect on the direction of the economy than suggested by GDP alone,” said National Retail Federation Chief Economist Jack Kleinhenz. “Given that, we continue to look for a soft landing this year.“
“While it’s difficult to reconcile these (economic) views, what we’ve learned over the last several years is don't count the American consumer out, at least not yet,” Kleinhenz added.
