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What our shopping choices say about the U.S. economy

Macy's, the nation's largest department store chain, has scaled back its sales forecast for the year.
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Macy's, the nation's largest department store chain, has scaled back its sales forecast for the year.

Shoppers are making fewer purchases and fewer trips to stores. But when they do check out at the register, they often spend more, revealing the impact of inflation. Many lower-income shoppers are cutting back on non-essentials like home decor and spending big at discount dollar stores.

These are some of the takeaways from a spate of mid-year financial report cards released by America's leading retailers, including Walmart, Macy's and Dollar Tree. They reflect a deep uncertainty that has set into the U.S. economy, with inflation running at the highest rate in decades.

Department store chains Macy's and Nordstrom, as well as Victoria's Secret this week joined a growing list of retailers cutting their forecasts for the rest of year. Companies are flagging fewer visits from shoppers compared to a year ago, though some retailers, including home goods seller Williams-Sonoma on Wednesday and Home Depot last week, continued to report growing sales despite slower store traffic.

At Dollar General and Dollar Tree, inflation had the result of boosting sales, the companies reported Thursday, as shoppers sought cheaper groceries, smaller packages and more deals on essentials.

Some retailers seeing a dip in sales have blamed their race to discount and sell off unwanted inventory: an unexpected glut of things like pajamas and kitchen appliances that were hot in the pandemic until suddenly shoppers became more interested in travel and outings to restaurants.

People are still shopping

All this comes against a backdrop of a massive, record-blasting shopping spree that marked 2020 and 2021. This year, as pandemic restrictions lifted, people turned back toward experiences rather than things. And then, as prices for gas and food boosted inflation, more shoppers began to switch to private brands or skip discretionary items.

In surveys, people say they feel extremely anxious about finances. Still, in July, retail sales, when adjusted for inflation, edged up both compared to June and to July 2021 as prices somewhat eased.

"Every metric I see is that the economy is pretty resilient," said Sucharita Kodali, an analyst with Forrester, pointing to higher wages, low unemployment, decent savings levels and retail spending remaining above pre-pandemic levels. "Retail spend, even in spite of inflation, is at a record high."

Shoppers are "under pressure"

This week, Macy's, the largest U.S. department store chain, scaled back its forecast for the full year. The company said its shoppers are not switching to less expensive brands, as other retailers have seen, but rather seeking out discounts and prioritizing purchases such as office clothes as more people return to the workplace in person.

The consumer "is actually still healthy, but they're under pressure. Wage rate is not keeping up with the pace of inflation," CEO Jeff Gennette told Bloomberg on Tuesday, suggesting that upscale shoppers were less affected and luxury goods were selling well.

Kodali points out that many retailers – particularly department stores – had wobbled long before the pandemic, particularly as many malls declined and big brands raced to sell directly to shoppers online.

Economists at Wells Fargo are warning that back-to-school shopping was a major factor boosting retail spending in recent months.

"Once the kids return to school and the bills come due, households will begin to tighten their belts," the company wrote in a report last week. "Even as inflation is showing signs of moderating, it will do so only slowly."

Meanwhile, Walmart – whose vast footprint and low prices make it much more of an economic bellwether – has done an about-face from warnings about the rest of the year to signal better times ahead.

In July, the company alerted Wall Street to slumping profits, as people's high grocery bills made products in other aisles less appealing. But last week, Walmart improved its forecast, noting that its stores were drawing more middle-income and higher-income shoppers.

Walmart's biggest rival Amazon, for its part, last month said it had seen no inflation impact on demand at all, with the company's shoppers continuing to spend more.

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Alina Selyukh is a business correspondent at NPR, where she follows the path of the retail and tech industries, tracking how America's biggest companies are influencing the way we spend our time, money, and energy.