The consumer is stressed

Back-to-School (BTS) spending has seen minimal growth of just 2% year-over-year through August, the weakest since the 2008 financial crisis, primarily due to consumer budget constraints. Retail sales in August increased by 0.1% month-over-month, slightly outperforming expectations, while nine of fourteen retail categories experienced flat or declining sales.

Key drivers included a surge in online purchases and boosted sales from Amazon Prime Day in July. As a result, forecasts for Christmas sales are similarly subdued, with anticipated growth between 2.3% and 3.2%.

The personal savings rate, which has fluctuated significantly, now sits at 4.8% amidst rising unemployment concerns, while inflation remains a challenge with prices 20-30% higher than pre-pandemic levels. Business and consumer confidence indicators have declined, contributing to lowered earnings estimates for Q3 from an initial 7.8% growth to 3.7%.

Additionally, potential strikes by dockworkers and Boeing workers, along with Hurricane Helene impacting the Gulf, pose risks to economic stability and could affect supply chains and inflation.