Consumer spending expected to weaken in July

The retail spending pace should slow in July, according to Retail Forward’s Future Spending Index. Debt combined with rising interest rates, a recent downtrend in the stock market, and income growth concerns were cited as the primary reasons for the projected decline.

Survey results also indicated that the longer-term trend toward fewer shopping trips will continue due to rising gas prices and increasing time pressures. Retail Forward believes that this trend will benefit broad assortment retailers because of the convenience of one-stop shopping.

Other projections for July include:

* Look for Up and Middle Market households, which account for the vast majority of retail spending, to pull back on the spending reins in July.

* Down Market households say they plan to spend at a somewhat stronger pace, as cash flow of these households with incomes under $22,500 are being boosted by a pickup in income growth and an increase in refinancing activity, allowing homeowners to tap into home equity to fuel spending. However consumer jitters regarding job market security and investment worth will prevent much of an increase Down Market spending in July.

* Many shoppers indicate that they are trading down to less expensive retailers this year. Many also are shopping more expensive retailers at the same time, suggesting that money saved by trading down is often being used to purchase items at higher-end retailers.

* Consumers are spending the larger shares of their incomes at supermarkets (27 percent) and supercenters (22 percent).

* Department stores, both traditional and value, are taking the largest hit in spending as a share of income. The 15 percent decline suggests that consumers are spending more of their incomes on basic goods such as consumables and less of their incomes on discretionary items.

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