As prices remain high, U.S. consumers cut back on purchases

According to NPD, American consumers have begun to cut back on purchases of common goods, but the average selling price of goods remains at a high level during the epidemic .

Unit sales fell more than 8% for six straight weeks following the holiday shopping season compared with a year ago, according to a report by The NPD Group. Despite higher prices, these unit declines made the retail industry's revenue performance modest at best.

The one exception so far in 2022 was the week before the Super Bowl and Valentine's Day, ending Feb. 12, when unit sales fell 1% and revenues fell 7%. The days of double-digit year-over-year retail revenue growth are becoming a more distant memory.

“Over the past year, a combination of higher prices, greater demand, lower supplies and fewer promotions has begun to take a toll on consumers’ purchasing power,” said Marshal Cohen, NPD’s chief retail advisor.

"Year-on-year , January 2021 is no longer the peak period for economic stimulus , but consumer purchasing power is still declining. The willingness to consume is still there, but the demand for new products has weakened. "

Consumer retail demand is now about the same as pre-pandemic years , while sales revenue continues on its elevated pandemic trajectory. Even price cuts, traditionally seen in January, are not as low as in the previous two years when compared to December, showing continued elevated pricing.

In a February survey, 89% of consumers told NPD that they had noticed price increases while shopping in the past three months, and nearly half of them said that if price increases continue, they will prioritize purchases and postpone less important purchases to preserve their budget.

Higher prices offset retail challenges in the early weeks of 2022, but changes are coming. " The anniversary of the second wave of the pandemic is approaching, we can see the impact of Omicron , and seasonal and supply shifts are coming," Cohen said. "Retail is on the precipice of greater uncertainty, and the path forward will be determined by consumer behavior and the relevance of products amid these changes."

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