Some consumers are making big purchases on things like swimming pools and mattresses | Wilnesh News

As inflation and interest rates rise, Americans are abandoning some more costly, traditionally financed purchases.

Corporate executives this earnings season lament that customers are not interested in buying big-ticket items for bedrooms, backyards and everywhere in between. It comes at a critical time for the nation’s economy: Ordinary people have been dealing with a double whammy of high prices and borrowing costs, while economists and policymakers are trying to assess the impact.

That’s important because it adds to an eventual slowdown in consumer spending that experts have long expected. That means the Fed may be getting the signal it’s been waiting for that raising interest rates has had the desired effect of tightening the economy, which could be good news for investors and consumers.

“Consumers’ purchasing power is limited” Number of sleeps Chief Executive Shelly Ibach told analysts late last month. “As a result, consumers continue to review their spending and make near-term decisions based primarily on demand, price and perceived value. They are delaying purchases of higher-priced, durable products.”

Ibach said the mattress industry is in a “historic decline” and sales are likely to continue to decline after an already difficult two years. The Minneapolis-based company lost more per share in the first quarter and revenue fell short of forecasts by analysts polled by FactSet.

Sleep numbers are not alone. Over the past few months, senior executives in the consumer sector have been bracing for, and in some cases even witnessing, a slowdown. Data from Prosper Insights & Analytics, a partner of the National Retail Federation, shows that U.S. adults are increasingly postponing spending on areas such as home improvements and electronics compared with before the pandemic.

“Consumers are still spending, but we now sense they are becoming more cautious,” said Mark Mathews, executive director of research at NRF. “They are making important choices in how they spend. They are very, very price sensitive, and, There’s no doubt we’re back to a situation where consumers care about transactions.”

Additionally, higher credit card balances suggest that the era of consumers flush with cash spurred by the pandemic is over.Data show that since excess debt peaked at more than $2 trillion in August 2021, U.S. households have accumulated more than $70 billion in debt data analysis By the Federal Reserve Bank of San Francisco. A research group found that credit card debt is rising, and the Federal Reserve Bank of New York reports that Americans collectively owe more than $1 trillion.

Consumers often face high interest rates or inflation because the Fed often increases borrowing levels when prices rise faster than it deems healthy for the economy. But currently, although annualized inflation is significantly lower than the peak growth at the beginning of the epidemic, it is still well above the central bank’s 2% target.

Although the federal funds rate has remained between 5.25% and 5.50% for 10 consecutive months. By comparison, more than a year into the pandemic, the midpoint of the rate was just 0.13% in an effort to stimulate economic growth.

The level of the base interest rate can directly drive the variable interest rate of a credit card. With that in mind, Sleep Number’s Ibach said credit card delinquencies are one reason consumers are struggling. Raising interest rates from the Federal Reserve can also indirectly influence loan providers to raise interest rates on new borrowing agreements such as cars or homes.

LeggettCompanies that make parts like bed springs are being affected by interest rates and inflation. Specifically, CEO J. Mitchell Dolloff said that under price pressure, consumers are shifting their spending focus toward basic resources such as services and food, rather than higher-priced, less necessary goods. He also pointed out that rising interest rates are another burden on their shoulders.

wayfelA furniture e-commerce platform popular with cost-conscious shoppers says it’s having trouble selling its most expensive items. Management warns that this is a common trend among home decorators.

Retail sales data were flat from March to April, according to a Dow Jones survey, although economists expected a 0.4% monthly increase. Ministry of Commerce data Published Wednesday. Because the data is seasonally adjusted rather than adjusted for inflation, it could provide another signal that consumers are not keeping pace with rising prices.

Economists are quick to note that what feels bad to consumers in the short term may actually have a silver lining in the long run. Shoppers feeling unable to make larger purchases — especially when combined with trends like greater price consciousness — could provide the Fed with justification that it has put enough pressure on the economy to get inflation under control and Clearing the way for interest rate cuts to begin.

Matthews of the retail industry trade group said there are other factors at play. He explained that the pandemic has a pull effect. During the shutdown, consumers were stuck at home and snapped up items that would last for years. This may still be relaxing.

With a greater emphasis on value, shoppers may wait until Memorial Day or other times when sales are ripe, Matthews said.

Finally, many large items are also related to people moving in some way, Matthews said. That’s bad news considering the cool housing market, which has been hampered. Mortgage rates are soaring.

As with many other aspects of the economy, this negative trend can be felt Most affected by people at the lower end of the income spectrum. This is consistent with the view that the U.S. economy will show a “K”-shaped recovery from the epidemic, that is, there are obvious differences in the experiences of different classes.