Advanced US retail sales data released yesterday shows retail and foodservice sales for May jumped 8.1% from a year ago, but slipped 0.3 % to $672.9 from April after a weaker-than-expected March-April month, which the US Census Bureau simultaneously revised lower. previously forecast increase from 0.9% to just 0.7%.

A closer look at where consumers are spending their food dollars shows a slight 1.2% increase in seasonally-adjusted grocery store sales from April, after stagnating the previous month. In food services and drinking places, seasonally adjusted sales also rose – but only 0.7% from April – the smallest month-over-month increase in 2022.

Although retail and restaurant sales continue to rise, the entire increase is likely due to inflation, which continues to climb.

According to Labor Department data released earlier in the month, the consumer price index rose 8.6% for all goods and 10.1% for food over the past 12 months. In food, prices for products consumed at home significantly exceeded those consumed outside at 11.9% against 7.4%, according to the Bureau of Labor Statistics.

In an attempt to rein in inflation, the Federal Reserve announced yesterday that it would raise interest rates by three-quarters of a percentage point, significantly more than the expected half-percentage point. While this is the first hike of this magnitude since 1994, it may not be the last, with the Fed warning that more hikes of the same magnitude are on the horizon – but no one knows. not when or how often.

With interest rates rising and consumer spending falling, businesses that may need additional financing or credit to mitigate the potential for economic hardship in the year ahead should take action. quickly to secure it, Jennifer Palmer, CEO of eCapital Asset Based Lending, recently told Soup-of FoodNavigator-USA. To Nuts Podcast.

The worst may be yet to come

Those numbers will likely continue to fall before rebounding, suggest analysts who argue that retailers and brands should now plan for the worst while hoping for the best.

“Grocery sales will likely continue to stagnate due to the slowing economy and the possibility of a recession,”said Chip West, a retail and consumer behavior expert at Vericast.

He predicts that as this happens, consumer brand loyalty will erode as more shoppers turn to more economical options and seek out deals, fueling increased competition from private labels, dollar stores and discount stores.

But, he adds, as consumers rethink their purchases and shopping habits, stores and brands also have an opportunity to attract new consumers if they strategically leverage promotions and communicate their proposition effectively. of value – which is not limited to price.

Consumers have money, but need a reason to spend

Mike Graziano, senior consumer products analyst at RSM, agrees, noting that while consumers are concerned about the cost of goods today, their underlying finances remain strong, for now, suggesting that they have money to spend, but need a reason to do so. then.

“There has to be a reason for them to shop: to improve the consumer experience, potentially discounts, which is reason enough for a consumer to overlook some of the pricing pressures today,”he said.

He added that leveraging customer loyalty programs is one way to do this, which could also build long-term relationships.

Retailers and brands should recalibrate inventory

Graziano also stressed that retailers and brands need to offer products that consumers want, and figures released this month suggest they are currently not.

“These numbers will likely put more pressure on retailers with high inventory levels to be able to move inventory to restock their stores for the back-to-school and holiday shopping season,”he said.

He added: “Long term, these numbers mean retailers will have to rethink their projections and potentially their promotional plans throughout the summer.”

To help them do this, he again highlighted loyalty programs, which not only engage consumers but “enable businesses to source critical customer data to better prepare

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