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Economists and investors have been closely watching the consumer downturn in recent months.
Warning signs included a drop in retail sales in June and a warning from Amazon’s CFO that “consumers are cautious.” Analysts had been bracing for tighter retail profits after Home Depot’s same-store sales slumped.
You may feel a lot better after Thursday.
Retail sales rebounded sharply by 1% in July, with most of the increase coming from auto and gas station sales, but the gains were broad-based.
Earlier, retail giant Walmart (WMT) reported better-than-expected results, and CFO John David Rainey was cautiously optimistic, though not exactly optimistic, in an interview with Yahoo Finance.
“Consumer trends have been consistent. If you look at each month in the second quarter, they’ve all been pretty consistent. There was no dip in July as some were expecting. That’s the outlook for the year,” he said.
Michelle Meyer, chief economist at the Mastercard Economics Institute, told Yahoo Finance that she sees consumer spending trending back toward normal (or a new, but stable, normal) after a long period of pandemic-induced disruption. “The landscape that we’re settling into now is going to hopefully feel a bit more balanced…There won’t necessarily be huge swings across different sectors,” she said.
That doesn’t mean spending won’t be uneven from month to month, or that all income brackets will spend equally.Goldman Sachs strategists dug deep into corporate earnings reports and found mixed sentiment toward consumers.
“Two common discussion points that continued throughout the quarter related to the affordability and value of companies’ offerings, and the disparity between lower- and higher-income consumers,” the team, led by David Kostin, wrote.
As for how this environment will affect the various retailers themselves, BMO Capital’s Simeon Siegel said they will become much more differentiated than they have been in recent years.
“Despite what appears to be a clearly challenging environment, some companies are still winning and growing revenue by getting customers to buy what they sell,” Siegel said. “So it’s hard to blame top-down macro pressures when your direct competitors are facing completely opposite outcomes.”
And as 2024 earnings roll around, Siegel expects these divergences to continue.
The story continues
Julie Hyman is co-anchor of Yahoo Finance Live, weekdays from 9 a.m. to 11 a.m. ET. Follow her on X. Jules Cimentand read her other stories.
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