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Retailers banking on strong back-to-school sales will feel the pinch this summer as strapped consumers are on track to sharply curtail their shopping sprees, according to new research.
The critical back-to-school shopping season, which kicks off after July 4 weekend, will grow by 5.5% this year, compared to the torrid 13.1% growth in 2021, according to forecasting research from consulting firm, Customer Growth Partners.
“We can tell momentum weakened in May and June,” said CGP president Craig Johnson, “but if it slides any further we could see growth of between 2% and 3%” for back to school.”
Such low growth would be an ominous sign of a feared recession as consumers feel the sting of the highest inflation rate in 41 years.
“A recession is not a slam dunk, but if consumer spending is down in July and August during the back -to-school season, that’s a clear red light instead of a blinking yellow light,” Johnson told The Post.
Over the past 20 years, back-to-school sales have grown on average by 4.5%, according to CGP data.
The expected 5.5% growth is “nothing to sneeze at,” Johnson said, “but it’s clearly a deceleration from 2021.”
The slowdown in consumer spending began in March, he added, with the growth rate dialed back to a 7% — compared to 11% in 2021.
Last year, shoppers were flush with cash from stimulus money and had been cooped up by lockdowns after spending the previous year mostly attending school remotely.
But spiking energy prices, declining federal stimulus, rising interest rates, supply chain disruptions and falling personal savings are all taking a toll, especially on lower income families.
“For consumers, 9% inflation has been an unvarnished disaster, eroding real incomes since wages and salaries are up barely 5% — with the inflation “tax” falling most heavily on lower-income and fixed-income households,” Johnson said.
Consumers are expected to invest in their wardrobes this summer, with spending on apparel expected to rise by 5.9% — compared with the whopping 33% growth rate last year when schools and businesses were opening up again.
But spending on electronics is expected to decline by 4% as most shoppers stocked up on devices during the height of the pandemic when many worked or attended classes remotely.
Target chief executive Brian Cornell said this month that he will be closely monitoring consumer spending during the Fourth of July holiday weekend – how far consumers are willing to travel and how much they spend on food – as a gauge of the health of consumer.
“July 4th weekend will be really important,” Cornell said during a presentation to the Economic Club of New York.