Retail demand shows weakness, leading to first inflation dip in 6 months

REAL ECONOMY BLOG | May 15, 2024

Authored by RSM US LLP

In a noteworthy turn, core goods prices have experienced a continued decline, contributing to the first dip in inflation in six months, according to April’s consumer price index.

April’s retail sales data paints a picture of stagnation, hinting at a weakening consumer base grappling with high interest rates and dwindling savings. On the other hand, the services sector continues to pose a high risk of sustained inflation, primarily driven by escalating labor costs.

Reports from retailers and restaurants indicate a noticeable decrease in consumer demand, a trend that bears close observation as we progress into the second half of the year.

The takeaway

• Price analysis: As consumers demand change, retailers and restaurants will need to analyze pricing to maximize both demand and profits. Technology solutions that analyze both internal and external data can help companies make data-based decisions.
• Consumer experience: Softening demand will accentuate the need for retailers and restaurants to win consumers’ dollars. Companies that lead their categories in convenience and loyalty will be the winners.