According to Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment, U.S. retail spending, excluding automotive, increased 11.2 percent year-over-year in July, while retail sales, excluding automotive and gas, rose 9.0 percent.

Notably, e-commerce sales were up 11.7 percent year-over-year (YOY), a sharp increase after months of softer growth. Rising prices, particularly for food and fuel, were a contributing factor, as Mastercard SpendingPulse reflects nominal spending and is not adjusted for inflation.

Spending increases in July outpaced monthly YOY growth so far in 2022, with demand and higher prices contributing factors. Of note:

  1. Consumers continue to navigate high inflation as they spend on wants and needs. The Grocery sector saw sales increase +16.8 percent YOY in July due primarily to food price increases. Apparel (+16.6 percent) and Jewelry (+18.6 percent) sales saw demand-driven YOY growth outpacing sector-specific inflation.
  2. While in-store sales remain elevated, up +11.1 percent YOY/+13.9 percent YO3Y, e-commerce posted its first month of double-digit sales growth (+11.7 percent YOY) since December. E-commerce is up nearly double pre-pandemic levels (+98.5 percent YO3Y). Online sales ticked up since the beginning of June, though July’s major promotional events helped entice consumers to spend and save with online deals.
  3. Travel remains a priority, with Lodging up 29.6 percent YOY and Airline sales up 13.3 percent YOY. Fuel and Convenience spending remains elevated (+32.3 percent YOY /+47.1 percent YO3Y), though the growth rate is down compared to June, reflecting price declines at the pump.

“The latest retail trends place an emphasis on consumer choice and passion-driven spending. They’re hunting for deals, shopping across channels and ultimately still spending on experiences and goods that make them feel good,” said Steve Sadove, senior advisor for Mastercard and former CEO and chairman of Saks Inc. “As retailers grapple with excess inventory and supply chain constraints, it’s likely that the promotional activity seen in July will continue to be an important strategy for retailers.”

Mastercard Economics Institute
(housing market cooldown slows sales of home-related goods)

After heating up during the pandemic, the U.S. housing market has cooled since the beginning of 2022, influencing consumer spending on home-related goods. Each time a house sells, there is usually a significant amount of spending as consumers outfit their home, but with significant interest rate hikes resulting in fewer homes sold, this has been translating to a natural decline in home-related purchases, as reflected in this month’s SpendingPulse. Sales growth for the Home Improvement (+2.9 percent) and Furniture & Furnishings sectors (+5.0 percent) has slowed.

“Consumers’ purchasing power has been strained by higher prices, particularly for the most fundamental needs-based categories like food and energy,” said Michelle Meyer, U.S. chief economist, Mastercard Economics Institute. “Thus far, nominal spending remains strong as consumers cope with high price inflation. As we continue to look at the strength of the consumer, we will be keenly focused on trends surrounding employment and wage growth.”

Photo courtesy PODS