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451 survey: US consumer spending plans steady amid inflation, COVID-19 concerns

Consumers indicated that they planned to keep their spending flat amid concerns over inflation, the economy and rising energy prices, according to a new survey by 451 Research.

More than half of survey respondents said their spending would remain the same over the next 90 days compared to the previous 90 days, while 19.2% said they would spend less, according to 451 Research's Voice of the Customer: Macroeconomic Outlook, Consumer Spending and OTT Streaming, Economic Experiences 2021 survey fielded in July.

That remains relatively unchanged from the previous edition of the survey, conducted in April.

But concerns over inflation and COVID-19 could lead to a bleaker outlook for the fourth quarter after an uptick in demand at restaurants, hair salons and in-store shopping earlier this year, said Michael Nocerino, research analyst with 451 Research. According to the U.S. Bureau of Labor Statistics, consumer prices rose 5.4% in September compared with a year ago.

About one-third of survey respondents cited inflation as the macroeconomic force posing the greatest threat to their personal finances, followed by COVID-19 (at 21.6%). More than 20% of respondents said energy prices were a threat.

"Consumers are feeling the pinch quite frankly," Nocerino said. "All that pent-up demand is slowing."

The results are significant because while higher-income households are able to spend freely, that spending can only do so much to offset the impact felt by low- and middle-income earners, which the economy relies on for growth, Nocerino said. Of the 1,287 U.S. respondents who participated in 451's July survey, 21% had household incomes of $100,000 or more.

Surveyed consumers indicated they planned to slow discretionary spending in several areas, with 18.3% saying they would spend less on restaurants and 17.6% indicating they would restrict spending on movie theaters. Other frequently cited categories facing cutbacks included apparel (16.2%), vacation and travel spending (15.9%), sporting events (13.4%) and consumer electronics (13.2%).

Consumers were split about how to view the economy in the future. While 33.7% expected the economy to worsen over the next 90 days, 35.3% expected conditions to remain the same and 31% expected the economy to improve.

Continuing inflationary pressure, caused largely by rising transportation and wage costs, could impact consumer spending just as retailers such as Inc. and Walmart Inc. gear up for the critical fourth-quarter holiday season, said Arun Sundaram, senior equity research analyst at CFRA.

Retailers are paying three to four times more to charter their own ships overseas and bring goods back to the U.S. in an attempt to alleviate concerns about supply shortages, Sundaram said, adding pressure on companies to raise prices or risk slimmer margins.

"They need to get products onto the shelves before the holiday season, and they're willing to do anything to do that," Sundaram said. "If they don't, they'll lose market share to other retailers."

451 Research is part of S&P Global Market Intelligence.