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Inflation’s Impact: US Consumers Tighten Back-To-School Budgets Amidst Rising Costs

Inflation is weighing on discretionary spending in the world’s largest economy, with American households pondering double-digit cuts to back-to-school supply budgets.

The average family will spend 10% less on each student this summer than in 2022, Deloitte predicted on Wednesday, putting the retail industry’s ability to withstand a more cautious consumer mood to the test.

Reduced Inflation in the United States

Deloitte estimated after surveying 1,200 parents that shoppers will spend $31.2 billion, or $597 per child, during the period when parents traditionally stock up on children’s apparel and school supplies. 

This is a small proportion of the amount expected to be spent during the holiday season, which runs from November to January, but historically, back-to-school sales have served as an indicator of what retailers can expect during the holiday season.

Even as U.S. inflation falls from its recent highs, households face the problem of prices rising faster than their incomes. Three out of ten parents surveyed by Deloitte reported being in a worse financial situation than the previous year, and fifty percent anticipated the economy to diminish over the next six months.

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Several Economists Had Expected

Finance-Money-Lifestyle-Family-US-News
Inflation is weighing on discretionary spending in the world’s largest economy, with American households pondering double-digit cuts to back-to-school supply budgets.

According to the U.S. Bureau of Labor Statistics, the price of school supplies has increased by 23,7% over the past two years. Eighty percent of those surveyed by the National Retail Federation indicated that they anticipated higher prices during this year’s back-to-school season.

Since the easing of Covid-19 restrictions unleashed a surge in spending on experiences previously denied to them, Americans have become more discerning shoppers.

Nick Handrinos, vice chairman of Deloitte, stated, “Consumers will likely prioritize where they spend their money as they seek to replenish their savings accounts and spend on experiences, such as summer vacations, over goods.”

Price-conscious consumers are hungry for deals during the back-to-school season, according to Deloitte, browsing earlier and primarily online for tech products. Adobe reports that online prices have been decreasing for ten months, and analysts anticipate a significant increase in Amazon Prime Day purchases this year.

Although US consumer spending has been more resilient than many economists anticipated, with retail sales rising 0.3% in May, recent earnings reports indicate that an inflation-driven decline in discretionary spending is negatively impacting retailers and their suppliers. 

Nike, for instance, reported that its sales in North America increased by only 5% during the fourth quarter of its fiscal year, a slowdown compared to the previous two quarters. Levi Strauss warned of wholesale weakness and announced plans to reduce prices on some items.

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Source: Financial Times via MSN

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