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Inflation Hits Hard: Retail Sales Barely Rise in May 2024—Learn How to Adapt!

By: Marc Perlof

Monday, July 1, 2024

 

Hey, Retail Real Estate Rockstars! I have some significant news on the ways that American purchasing patterns are evolving and how this may affect your retail sites. Let's examine the most recent economic data to see how it affects you!

 

Retail Sales in May 2024: Slow Growth

 

U.S. retail sales increased by just 0.1% in May 2024. This sluggish growth followed a 0.2% decline in sales in April. Five of the thirteen categories of retailers experienced lower sales, primarily as a result of lower gas prices and Memorial Day deals at furniture stores.¹


 

How Inflation Affects Shopping


Inflation is still driving up the cost of many goods, so consumers need to manage their money carefully. It's possible that retailers won't experience as many sales in the upcoming months due to this cautious purchasing. When costs rise, individuals typically buy necessities like groceries and forgo extras like dining out or

luxuries.¹


 

Interest Rates and Economic Strain

 

The Federal Reserve, has made the decision to maintain current interest rates. A higher interest rate makes borrowing money more expensive. This causes both firms and individuals to second-guess large purchases. Fed Chair Jerome Powell claims that although consumer spending is continuing, pressure is mounting on many households.¹

 

Tips for Retail Property Owners:

 

1. Understand Consumer Needs: Inflation has caused people to prioritize purchasing necessities. Ensure your renters are selling goods that customers actually need.¹


2. Watch Interest Rates: Getting a loan is more expensive when interest rates are higher. This can have an impact on the projects or upgrades you have planned.


3. Keep an Eye on Trends: Examine the sales of necessities for a more accurate understanding of what's actually going on with consumer spending.¹

 

Important Numbers to Know:

 

  • Retail sales only went up by 0.1% in May 2024.¹

  • Sales at restaurants and bars fell by 0.4%, the biggest drop since January, 2024.¹

  • Sales of essential goods rose by 0.4% in May after dropping by 0.5% in April, 2024.¹


Key Takeaway:


Lower-income consumers are cutting back on spending as their pandemic savings run out, and more people are missing credit card and car payments. While this slowdown might help the Federal Reserve curb inflation, it also risks triggering a deeper, more difficult-to-reverse economic downturn.

 

In these times, it's important to stay informed and flexible. Think about your tenant mix, keep track of economic trends, and be proactive in managing your properties. Call or DM me for more information on how to navigate these changes and make the most of your investments.

 

How are you changing your retail property investments to keep up with how people are shopping now?

 

 

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