Consumption does not weaken in the United States, but is inflated by inflation

AFP, published on Tuesday, May 17, 2022 at 11:54 p.m.

Consumer spending is still climbing in the United States, but is inflated by inflation, which lengthens consumers’ bills and reduces the contents of their baskets. Rising costs are also weighing on the profitability of some large retailers such as Walmart.

Supermarket giant Walmart, acclaimed for its low prices, saw an increase in spending in the food sector, and a drop in non-food purchases.

Consumers bought more products from less expensive brands, especially for meat or dairy products.

In addition, customers have tightened their belts on other expenses, especially since the exceptional aid that had been paid by the government during the pandemic has expired.

As summer approached, however, the group sold more garden furniture and barbecues.

Walmart’s core customers “tend to be more sensitive to price changes and have been more affected by high inflation”, which remained close to its highest level in 40 years in April, said Neil Saunders of Global Data.

The retail giant’s revenue rose 2.4% to $141.6 billion in the February-April period.

– Inflation has been there –

But inflation weighed on its net profit, which fell 25% to $2.05 billion. The company even lowered its profit forecast for its entire fiscal year, which caused its stock to fall on the New York Stock Exchange, losing 11.38% at the close.

The increase in inventories of items shunned by customers has increased warehousing costs and transportation expenses, affected by soaring gasoline prices.

Walmart also found itself with much higher salary expenses than expected, after hiring during the holiday season to replace employees absent because of the Omicron variant. But the workforce was in the end much more numerous than necessary with the rapid decline in the number of contaminations.

Another retail brand that allows us to gauge consumption in the United States, the DIY and household goods chain Home Depot also saw its turnover grow, over the same three months, by 4% compared to the same period last year, to 38.9 billion dollars.

Inflation, however, went through with it: the number of transactions carried out in its stores fell by 8%, even if the average amount spent by customers increased by 11%.

The pandemic had been, for many American families, the opportunity to do renovation or decoration work in their homes, which Home Depot had greatly benefited from.

Net profit (+2%) also progressed a little more slowly than sales, but the group slightly raised its sales forecast for the year and the share price rose by 1.68%.

– Tolerance put to the test –

“The biggest challenge for retail chains now is going to be balancing lower sales volume with higher costs,” said Neil Saunders.

Overall retail sales in the United States – in stores, online, and in restaurants – rose 0.9% in April alone from March, the department said on Tuesday. Trade.

But this increase in spending does not only mean that consumers have bought more. It is also a reflection of the prices which are still climbing at high speed.

For the coming months, “consumers’ tolerance for high inflation will continue to be tested,” said Lydia Boussour, economist for Oxford Economics.

However, it anticipates continued sustained consumer spending, thanks to rising wages and an accumulation of savings.

The president of the American central bank (Fed), Jerome Powell, recommended to him, to be able to curb inflation, a positive growth without being too strong.

“What we really need is to bring growth down from its very high levels of last year, to slow it down but still be positive,” so that supply and demand can be at the same level, he said, also Tuesday, in a conversation with the Wall Street Journal.

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