Economists have been looking for cracks in U.S. consumer spending for years now amid persistent inflation and higher interest rates, but until recently, Americans have defied the odds at every turn. Despite consistent recession forecasts and dismal consumer sentiment numbers caused by the soaring cost of living, Americans managed to continue spending at record levels until recently. But in April, retail sales growth stopped completely. And now, major retailers’ earnings reports have revealed some stark warning signs about the health of the American consumer.
First, to be clear, Walmart won the day. The retail giant topped Wall Street’s earnings and revenue forecasts in the first quarter, reporting adjusted earnings per share of $0.60, compared with the expected $0.52, and revenue of $161.5 billion, surpassing the forecasted $159.5 billion. E-commerce offerings and spending from high-income customers helped buoy the results. But the company also witnessed a key spending pattern that typically occurs when consumers are feeling financial strain: a shift from spending on wants to needs.
