Dive Brief:
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Consumer confidence in April fell to 89.7, the lowest since September and down from the final March reading of 91.0, according to the University of Michigan preliminary consumer sentiment index. The index’s highest reading after the Great Recession, 98.1, was in January last year.
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The data now indicates that “inflation-adjusted personal consumption expenditures will grow by 2.5% in 2016,” according to the index's chief economist Richard Curtin.
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The Wall Street Journal reports that economists expected the April index to rise to 92.0.
Dive Insight:
The University of Michigan’s index, like the government’s recent measures of tepid retail sales, reflects the hesitance among American consumers when it comes to the economy and the failure of wage gains to boost spending.
Although employment has been steady or improving for months and wage increases are happening, middle and lower incomes still must rise for Americans to widen their wallets, several economists say.
“I don’t think the consumer will spend beyond his or her means,” Gregory Daco, head of U.S. macroeconomics at Oxford Economics Ltd. in New York, told Bloomberg after March retail sales missed estimates. “A sustained acceleration in wages is still the missing piece.
Despite the results, Curtin notes that the declines have been small and that, rather than indicating a recession is looming, confidence should bounce back as the year continues.
“To be sure, the sizes of the recent losses have been quite small, with the Sentiment Index falling just 2.9 Index-points since December 2015, although it was down 6.2 Index-points from a year ago and 8.4 points below the peak in January 2015,” Curtin said in a statement. “None of these declines indicate an impending recession, although concerns have risen about the resilience of consumers in the months ahead. Consumers reported a slowdown in expected wage gains, weakening inflation-adjusted income expectations, and growing concerns that slowing economic growth would reduce the pace of job creation. These apprehensions should ease as the economy rebounds from its dismal start in the first quarter of 2016.”
In the meantime, retailers will invest in more ways to attract consumers to their stores and sites, even if they increasingly continue to favor spending on experiences rather than stuff. Big-box retailers like Target and Wal-Mart have focused on improving the store experience by cleaning up shelves and taking a more creative approach to merchandising. Across the board retailers have also invested in offering more in-store events and no-cost online resources, with the hope of fostering value and loyalty with the consumer.
“The old notion of ‘build it and they will come,’ and the store is in the center and the consumer wants the store, has been flipped on its head. It’s the consumer at the center. The store has to go to the consumer, wherever they are," Robin Lewis, CEO of The Robin Report, told Retail Dive in January.