With 2023 around the corner, business owners are all asking the same question: As inflation continues, what does it mean for us? Consumer trend predictions through the end of 2022 and beyond suggest that consumer spending will remain high for some time. It’s good news, giving us time to prepare for the less predictable years ahead.
Let’s look at the current consumer spending stats
While complete data isn’t yet available for Q4, monthly consumer spending is trackable. Retail sales through October were elevated 8.3% year-over-year. That figure includes gas and food, but even with those out of the picture, retail alone was up 7.5%. Of course, inflation changes those figures significantly. Adjusted for inflation, however, retail sales were still 0.5% higher than they were this time last year. Spending continues to hover at an almost unprecedented high.
Owners of retail businesses should note that while consumer spending isn’t lower than it was previously, it is different. Struggling to keep up with the exhausting price hikes, more consumers are spending money on essential products rather than fun extras. Their money simply isn’t going as far as it did last year, so they’re saving money to continue being able to buy the products they can’t go without. Meanwhile, non-essential items are slower to fall off the shelves.
Usually, the holiday season changes purchasing patterns. With households still bearing the weight of inflationary pressure, that seasonal shift may not be as dramatic as it was last year. At present, about 60% of US households are living paycheck-to-paycheck, and more Americans are relying on credit card usage to get through the holidays. The remaining 40% of households still have a decent amount of cash in their bank accounts, but some degree of caution is still likely to continue in regard to non-essential spending trends.
The inflation predictions aren’t great
Pour yourself a cup of coffee (preferably with a lid) and buckle up, because the bumpy ride is far from over. Despite a softening in October, inflation is still high. The Consumer Price Index for October was at 7.8% higher year-over-year; better than the 8.2% inflation rate in September, but still nothing to call home about. It’s roughly the same as spraying down the backyard while the house burns. Saving the dog house is an improvement, but it’s still nothing to celebrate.
7.8%, inflation is still the highest rate since 1982, and we’re all left wondering how quickly it’s possible for it to abate. The federal government’s target for inflation is 2% +/-. Unfortunately, the wage inflation of 4.5% isn’t coming close to keeping up with product and service inflation. For the time being, there’s still no sign that inflation is heading in the right direction. Analysts will be taking any small, positive changes as a good sign, but a rapid turnaround is unlikely.
Consumer spending trends may get worse before they get better
Consumer spending is predicted to remain high throughout 2023, especially for essential goods. Beyond that, it’s difficult to say. Since such a high percentage of US households are living check-to-check, many of our friends and neighbors are struggling to keep pace. More families are likely to use credit cards or loan services like Affirm to shop for the holidays. It’s likely that in the next year, many households will begin going into debt to make ends meet.
As much as we wish we could share more promising news, BYX has survived worse, and so has our Los Angeles community. We will continue to support the transportation needs of businesses across So-Cal, and we hope to share easier times together in years to come.