With Fewer New Products, Consumers Cut Discretionary Spending 7%

Consumers are cutting back on home improvement purchases.

Tracking the health of American retail sales requires extra attention these days, as economists struggle to exclude the impact of inflation, the unpredictability of fuel prices and the bump many shoppers get from tax refunds.

But a new report from Circana, formerly the NPD Group, teases out a concerning trend: Last month, people cut spending on discretionary items by 7% in dollar sales and 8% when measured in units.

That’s double the decreases recorded in January and February.

Certainly, some of that stems from higher interest rates and ongoing inflation, squeezing the extras out of many family budgets.

But Circana finds that it’s also due to fewer product innovations coming through pipelines, as many large companies cut back on launches during the pandemic.



“Consumers are beginning to spend less on both discretionary and essential purchases with more consistency,” says Marshal Cohen, Circana’s chief retail industry advisor. “To create some spending elevation, there needs to be new products and new ways of thinking to reflect the changed consumer behavior and retail landscape.”

Circana, formed by the recent merger of the NPD Group and IRI, says that in 2019, new general merchandise products accounted for over 5% of the market. “By the end of 2022, that number was less than 2%.”

That report comes as retail experts digest the government’s latest monthly sales tally, with the Commerce Department reporting a 1% seasonally adjusted dip in purchases at stores, restaurants and online.  

Of course, the most significant declines came in gasoline, reflecting lower prices. Department stores, electronic stores, home improvement, cars, and furniture came next. Grocery spending stayed the same for the month, while food services and online shopping gained.

Observers fret that as consumers worry about the economy, facing headlines about bank collapses, a cooling housing market and higher interest rates, they’ll cut back even more.

“Nervousness about spending is also contributing to the downswing,” writes Neil Saunders, managing director of GlobalData, in his note on the government’s report. “That’s one of the reasons why underlying volumes – or the amount people buy – declined by 1.4%, a much worse outcome than the 0.6% decline posted last month.” 

And while it’s good news that “shoppers are not retrenching completely, they are doing so selectively and are much more cautious about spending.”

The report notes a 4.3% drop at home improvement retailers, a 2.2% decline in spending on apparel, and a 1.9% dip at furniture and home stores.

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