A slump in retail and dining spending may be the result of a widening gap between high- and low-income households. While wealthier clients have continued to support overall spending trends, middle- and lower-income groups appear to be scaling back, according to a Placer.ai analysis.
Retail and dining traffic slipped into negative territory over the summer and has yet to rebound, suggesting that what many thought was a temporary cooling trend may be evolving into a broader consumer slowdown, the analysis said.
Weakening spending is not regionally isolated. States that had positive dining traffic growth during the first half have begun to flatten and many states that already were showing flat visit trends posted widening decreases in visits. For example, traffic in Idaho and Utah increased 2.1% and 2.4% year over year, respectively, during the first half, and saw decreases of 0.2% and 0.1% in July and August. Meanwhile, year-over-year traffic in New York State dropped from -1.2% to -2.3% during the late summer, while California saw visits swing from 0.3% in the first half to -2% in July and August.
The only states that showed an increase in dining visits over the summer were Vermont and Rhode Island.
Retail traffic also slowed across states, pointing to a broader decline in consumer activity. Visits to retail chains nationwide fell year over year in regions that had experienced high consumer resilience during the first half, including the Pacific Northwest and the Southwest. Vermont and Delaware were outliers in this trend.
The report said an additional driver of the broader slowdown may be international summer travel among high earners drawing dollars away from domestic retail and dining, a dynamic that highlights the risk of relying too heavily on affluent households to sustain consumer activity, said the report. Tariffs also may be responsible for a surge in buying earlier this year as consumers anticipated price hikes later in the year.
Spending is expected to slow further heading into the holiday season as discretionary spending continues to lag.
“Budget-conscious households may already be tightening their belts in preparation for holiday expenses, further dampening retail and dining performance,” said the report.
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