Shoppers on their way to the mall are paying more attention to prices at the gas station – and they don’t like what they see.
Consumer confidence in March fell 6 percent from the previous month, falling back to levels last seen in December, according to the closely watched University of Michigan Consumer Survey.
Joanne Hsu, director of Consumer Research, said: “The decline was seen across years and political parties.” “Consumers with middle and high incomes and stock holdings, affected by rising gas prices and volatile financial markets after the Iran war, showed a sharp drop in sentiment.”
Hsu said that consumers’ short-term economic outlook “shrunk” by 14 percent and that personal spending expectations fell by 10 percent, although long-term expectations were down.
Consumers – and the world – have been holding their breath since the US and Israel attacked Iran on Feb. 28, they cause a war that slows the flow of oil around the world and stoked instability.
About a third of the consumer opinion survey was completed before the war began. And Hsu said consumers interviewed after the war began revealed high inflation expectations.
Consumers expect inflation to rise to 3.8 percent for next year, up from 3.4 percent in February, the largest rate in nearly a year. In comparison, consumers put inflation at 2.3 percent to 3 percent in the two years before the pandemic.
As read in the Consumer Price Index, inflation rose 2.4 percent in February and has not risen above 3 percent since May 2024.
Even though uncertainty is increasing, consumers and brands seem to be watching and testing the atmosphere.
A gallon of regular gas sells for $3.98 on average, according to AAA. That’s $1 more than a month ago, with a $4 price tag seen as a bargain by consumers.
So far, at least, the long-term view is holding.
The National Retail Federation recently predicted that US retail sales will rise 4.4 percent to $5.6 trillion this year, up from an average of 3.6 percent over the past decade.
But Mark Mathews, the NRF’s chief economist, said confidence was not expected to improve much.
“While the political environment and ongoing trade policy challenges require close attention, we remain optimistic that the fundamentals of the US economy will support continued stability in the coming year,” Mathews said this month.
Although household finances continue despite price increases, energy – with high gas prices combined with increased tariffs and other major costs – makes business difficult all around.
Lululemon Athletica Inc., for example, is running a retreat and is looking for a chief executive officer.
The plan is a turnaround that includes reducing discounts, improving the product and driving full-price sales.
The brand’s sales rose 6 percent last year, at constant currency and excluding an extra week in the retail calendar in 2024. This year, Lululemon is looking for revenue to grow 2 percent to 4 percent to $11.35 billion to $11.5 billion — by 1 percent to 3 percent in the US.
Asked about customer traffic and “high-quality” customers, interim chief executive officer and chief financial officer Meghan Frank said she needs “more time to understand what’s happening with high-quality visitors.”
Frank said: “We’re seeing some green shoots in some of the new products. And I would expect that to extend to that guest as well. So we’ll share more about what we’re seeing as it progresses.
Things would move a little faster — for Lululemon and everyone else — if the idea of an “oil crisis” wasn’t in the air and gas prices were still there.
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