High food prices impact consumers' GM spending

U.S. general merchandise retail sales revenue declined during the three weeks ending November 5, 2022. Year-over-year sales revenue in October fell 5% below a year ago, followed by a 14% decline in the first week of November. Several factors contributed to declining sales, with the rising cost of living at the forefront, according to The NPD Group, which recently merged with Information Resources, Inc. (IRI) to create a leading global technology, analytics and data provider. Together, NPD and IRI are able to see spending across $2.8 trillion of consumer spending in the U.S.

“The growing weekly grocery costs and monthly credit card bills have begun to chip away at discretionary purchases,” said Marshal Cohen, chief retail industry advisor for NPD. “Consumers can only absorb climbing expenses for so long before they begin to reassess their spending capacity.” 

For much of 2022, elevated average prices have kept general merchandise sales revenue hovering at or above 2021 levels, and until recently sales have maintained healthy gains compared to 2020 results. At the same time, spending on food and beverage and other consumer packaged goods (CPG) continue to exceed results of any of the past three years. In particular, rising food and beverage prices and the shift toward consumer spending on food in general is now affecting spending in other areas.

In addition to the growing competition for the consumer’s wallet, many consumer needs are still being fulfilled by purchases made in the past two years, resulting in lower demand levels. Compounding these challenges are endless discounting on existing product inventory, prolonged warmer-than-normal temperatures delaying the typical seasonal shift to cold weather products, and distractions from the midterm election.

“Rising interest rates and other aspects of the economy are affecting consumer confidence, and the lack of new product is impairing their need and desire to spend,” Cohen said. “Over the holidays and into the new year, consumers will be looking for exclusive product offerings, uniquely compelling benefits, and promotions that break through the noise and create a sense of urgency to make the purchase.”