Easing Inflation Helps Maintain Steady Grocery Spending

Consumers are striking a balance between caution and resilience, as evidenced by recent sales data. According to the U.S. Census Bureau, there was a modest but unexpected 0.1% increase in total retail and foodservice sales, with a 2.1% year-over-year (YoY) gain. The latest figures show that total retail sales reached $710.8 billion, with grocery store sales nearing $74.46 billion for the month, hovering between $74.13 billion in June and $74.89 billion in July. On a YoY basis, grocery sales have experienced a slight increase.

Courtesy of U.S. Census Bureau

Despite ongoing inflation concerns, the data reflects consumers’ willingness to spend, while adapting their purchasing behaviors. Industry experts note that the better-than-expected growth in retail sales continues to reflect resilience. Chip West, director of category strategy at RR Donnelley, pointed out that the 0.1% month-over-month rise in August, coupled with a 2.1% YoY increase, signals a positive trend despite some projections of a decline. West observed that grocery sales showed a modest 1.5% increase compared to August 2023, with consumers increasingly opting for store-brand products to seek better value.

Jack Kleinhenz, chief economist at the National Retail Federation, added that the latest numbers demonstrate the resilience of the American consumer. Although sales growth slowed slightly from the previous month, he noted that consumer spending is unlikely to falter. He attributes this continued spending power to recent wage increases, which have outpaced inflation, even as payroll growth has slowed in recent months. Easing inflation has provided shoppers with more financial flexibility.

Additional insights from 210 Analytics revealed that consumers are carefully managing their spending by eating out less often and adjusting restaurant orders to save money. As a result, retail spending is benefiting, particularly in the form of takeout and delivery.

Data from Circana, shared by 210 Analytics, showed a 2.3% increase in total food and beverage sales for the five-week period ending September 1. Sales of fresh beef, chicken, turkey, and lamb saw notable increases, with fresh lamb jumping 27.1%. Produce sales also surged, particularly in berries, tomatoes, potatoes, and onions. Additionally, prepared meats saw a 12.9% gain, while frozen foods have returned to growth.

Looking ahead, the economic outlook remains uncertain as the U.S. presidential election approaches. In response, the U.S. Federal Reserve recently announced a 0.5% interest rate cut aimed at stimulating the economy, offering further hope for consumers and retailers alike.