Inflation keeps consumer spending flat in July
Consumer spending numbers reveal the impact of inflation, while a shift in spending from goods to services drives foot traffic at movie theaters
- Ebere Anokute
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Last month, I referred to July as bittersweet, due to its reputation as the impasse of the year. The halcyon haze of the early summer has faded, while the historically high temperatures parallel the winds of winter that await us in the remainder of the year. I don’t know when I became a July truth-er, but it looks like I’m not the only one!
Retail spending flat in July, inflation to blame
After increasing by just under 1% in June, consumer spending numbers were flat month-over-month in July, showing no increase. The likely cause for this is inflation; the consumer price index in July was 8.5% higher than a year ago, and although this is down from June’s inflation number, it appears that many consecutive months of sky high prices has finally begun to affect our spending habits.
CPI % Change Year-over-Year
Consumer spending came in at $682.8 billion in July, accounting for a 10.1% increase year-over-year, but with inflation pushing prices up, this reflects the fact that the things we are buying are more expensive, but we are not necessarily buying more things.
It’s no surprise that gas stations saw the greatest year-over-year increase in spending at nearly 40%. However, with fuel prices inching down slowly since peaking earlier in the summer, consumers have been applying those savings to other categories. Non-store retailers were up 2.7% month-to-month, and over 20% year-over-year, as consumers continue to utilize any and all available to channels to obtain their products. Miscellaneous store retailers also gained 1.5% this July, which also accounted for an 18% increase over last July. These changes reflect a shift in consumer spending preferences from goods to services and experiences.
Year-over-year change in spending as of July 2022
The good news is that while inflation and consumer spending numbers are in flux, this doesn’t appear to be impacting retailers physical store expansion plans. Retailers are opening more stores than they’re closing right now, and are closing fewer stores than they did last year.
According to Coresight Research, there were 4,328 announced store openings and 1,912 announced closures in the first half of the year. This amounts to nearly 2% more openings than in the first half of 2021, and 58.1% fewer closures from that same period. Great news for those of us who like to shop in person!
Movie theater visits inch closer to pre-pandemic levels
Nothing better exemplifies the aforementioned shift in consumer preferences from goods to services and experiences than the recent upticks in movie theater foot traffic. After being one of the hardest hit retail categories during the pandemic, we are finally beginning to see traffic return to movie theaters.
Retail foot traffic change from June 2019
These locations were not deemed essential and were therefore mandated to remain closed for much longer than other retailers, resulting in an almost 100% decrease in foot traffic. But according to Placer.ai, the three largest movie chains have recently come within 25% of their 2019 foot traffic levels:
- Cinemark was down just 4.1% in June (down 30% in January)
- Regal Cinemas was down 15.5% in June (down 50% in January)
- AMC Theaters was down 24.9% in June (down 50% in January)
It’s important to note that although foot traffic has been improving steadily, the pipeline for theatrical blockbusters is fairly light this fall. Theaters have been benefitting from increased foot traffic this summer on account of blockbusters like “Jurassic World: Dominion” and “Top Gun: Maverick,” so the lack of oncoming blockbusters is a concern. Further, Cineworld Group, which owns Regal Cinemas, is reportedly preparing to file for Chapter 11 bankruptcy. When that happens, we expect that some weaker Regal locations could close as part of the restructuring.
Potential headwinds notwithstanding, I’m still eager to make my way back to a movie theater soon to see Jordan Peele’s “Nope.” And although I don’t believe I’m the target audience at all, I might have to go see what all the hype is about the “Top Gun” sequel. Movies don’t usually make a billion dollars by accident!