Earnings Season Shows Consumer Spending Bucking a Cautious Outlook

But thus far into earnings season, a bit less than a month old, there are indications that, overall, U.S. households are proving to be resilient. There are categories, particularly essentials and packaged goods, which are drawing their fair share of the monthly budget.

Within retail, a standout example is the record-high back-to-school spending, as documented here, suggesting that items such a backpacks and dorm rooms are non-negotiable for many families as funds earmarked for those (and other) items are set to grow by 4% year over year, and touch the highest levels since 2021, at more than $628 per student. That signals an “intent to spend” that will last through the summer months and into the fall.

In the meantime, June’s retail numbers came in better than expected, with sales rising 0.6% from May and climbing 3.9% year on year. Health and personal care stores surged by 8.3% and clothing and accessories sales climbed 3.9%, outstripping inflation, which in turn means that at least in some cases, consumers are buying more items.

But there are some puts and takes in an environment where sentiment is still muted. Travel, and by extension, luxury spending have seen headwinds, as luxury brands have noted pullbacks from U.S.  consumers. As for the essentials — the items sold by CPG companies and by retailers — PYMNTS has found that a third of consumers are purchasing fewer items, which leaves a majority (two-thirds) spending at current levels, or boosting their spending.

Some Pressure in the Mix

Get a bit more granular, and income makes a difference. Our data found that consumers who do not live paycheck to paycheck with issues paying their bills are 2.4 times more likely to keep their purchasing habits at the same level amid price increases compared to those struggling financially. Specifically, 31% of financially secure consumers reported they would continue buying at their current quantity and frequency. By contrast, only 13% of paycheck-to-paycheck consumers with issues paying their monthly bills indicate the same.

Deals and promotions matter, as they move consumers to spend online and in-store, and where, for example, Costco saw a 5.8% rise in same store sales. For the merchants, the balancing act between navigating tariff-underpinned costs and price increases is becoming a fact of life. As PYMNTS reported at the end of last month, consumer packaged goods bellwether Procter & Gamble (P&G) is raising prices. In its latest quarter, the company logged a 2% increase in net sales.

Chief Financial Officer Andre Schulten said the price hikes would be in the “mid-single digits” on about 25% of products in the U.S.  Management said it was projecting a slight downturn in consumption among both higher-income and lower-income consumers in response to economic conditions.

“The volatility the consumer is seeing, I think, is maybe not necessarily grounded in their current reality, but more on what to expect for the future,” Schulten said.

There’s a breaking point, so to speak, for consumers, and PYMNTS Intelligence has documented the impact of hypothetical price increases, down to the millions of customers that would be lost.  A doubling in prices would translate into a 21% additional loss in the customer roster, documented in the accompanying chart.