Some consumers are punting big purchases like pools and mattresses

Americans
are
kicking
the
can
down
the
road
on
some
more-costly,
traditionally
financed
purchases
as
elevated
inflation
and
interest
rates
bite.

Corporate
executives
this
earnings
season
have
lamented
that
customers
are
disinterested
in
shelling
out
on
big-ticket
items
for
their
bedrooms,
backyards
and
everywhere
in
between.
It
comes
at
a
pivotal
moment
for
the
national
economy:
the
average
Joe
has
been
contending
with
a
double-whammy
of
high
prices
and
borrowing
costs,
while
economists
and
policymakers
are
trying
to
gauge
the
impact
this
has
made.

This
matters
because
it
adds
to
a
growing
picture
of
consumer
spending
finally

slowing
down,
as
experts

long
anticipated.
That
means
the
Federal
Reserve
may
get
the
sign
it’s
been
waiting
for
that
interest
rate
hikes
have
had
their
intended
effects
of
tightening
the
economy,
which
could
be
good
news
for
investors
and
consumers.

“The
consumer’s
purchasing
power
is
limited,”


Sleep
Number
CEO
Shelly
Ibach
told
analysts
late
last
month.
“As
a
result,
consumers
continue
to
scrutinize
their
spending
and
make
near-term
decisions
based
primarily
on
need,
price
and
perceived
value.
And
they
are
deferring
higher-ticket,
durable
purchases.”

Ibach
said
the
mattress
industry
is
in
a
“historic
recession,”
with
sales
likely
to
continue
to
decline
after
two
already
tough
years.
The
Minneapolis-based
company
lost
more
per
share
and
recorded
lower
revenue
than
analysts
polled
by
FactSet
had
anticipated
in
the
first
quarter.

Sleep
Number
isn’t
alone.
Executives
across
the
consumer
arena
have
been
preparing
for
—
and,
in
some
cases,
seeing
—
a
slowdown
over
the
last
several
months.
Data
from
Prosper
Insights
&
Analytics,
a
partner
of
the
National
Retail
Federation,
shows
American
adults
have
been
increasingly
delaying
spending
in
areas
like
home
improvement
and
electronics
compared
with
before
the
pandemic.

“Consumers
are
still
spending,
but
the
sense
that
we
get
now
is
that
they’re
being
a
little
bit
more
careful,”
said
Mark
Mathews,
the
NRF’s
executive
director
of
research. “They’re
making
important
choices
in
terms
of
how
they
spend.
They’re
very,
very
price
sensitive,
and,
definitely,
we
are
back
into
a
situation
where
consumers
are
all
about
the
deal.”

A
shopper
on
the
fence
about
if
they
feel
like
an
expensive
purchase
is
within
budget
—
likely
a
more
ubiquitous
feeling
now
with
hot
inflation
—
would
previously
lean
on
paying
over
a
longer
period
of
time
by
using
credit.
But
those
options
have
fallen
out
of
favor
as
interest
rates
rose.

Also,
more
credit
card
bills
are
delinquent,
showing
that
the
era
of
consumers
being
flush
with
cash
from
pandemic
stimulus
has
come
to
an
end.
U.S.
households
are
cumulatively
more
than
$70
billion
in
debt
after
excess
peaked
above
$2
trillion
in
August
2021,
according
to

data
analyzed
by
the
San
Francisco
Fed.
One
research
group
saw

credit
card
debt
rising,
while
the
New
York
Fed
reported
that
Americans
collectively
owe
more
than
$1
trillion.

Consumers
are
usually
faced
with
either
high
interest
rates
or
inflation,
as
the
Fed
typically
increases
borrowing
levels
when
prices
are
rising
faster
than
it
deems
healthy
for
the
economy.
But
at
this
moment,
annualized
inflation,
though
significantly
off
peak
growth
seen
earlier
in
the
pandemic,
is

still
well
above
the
central
bank’s
goal
of
2%.

That’s
despite
the

Fed
funds
rate
sitting
between
5.25%
and
5.50%
for
about
10
months.
For
comparison,
that
rate
had
a
measly
midpoint
of
just
0.13%
for
more
than
a
year
during
the
pandemic
in
a
bid
to
stimulate
economic
growth.

Where
the
benchmark
interest
level
sits

can
directly
drive
variable
rates
on
credit
cards.
Given
that,
Sleep
Number’s
Ibach
said
credit
card
delinquencies
were
one
reason
for
the
consumer
being
stretched.
Increases
from
the
Fed
can
also
indirectly
influence
loan
providers
to
push
up
interest
rates
on
new
borrowing
agreements
for
things
like
cars
or
homes.

Leggett
&
Platt,
which
makes
components
like
springs
for
beds,
is
seeing
the
effects
of
both
rates
and
inflation.
Specifically,
CEO
J.
Mitchell
Dolloff
said
consumers
are
shifting
their
spending
to
focus
on
services
and
affording
baseline
resources
like
food
amid
price
pressures,
as
opposed
to
pricier,
less
essential
goods.
He
also
cited
increased
interest
rates
as
another
weight
on
their
shoulders.

Wayfair,
the
furniture
e-commerce
platform
popular
among
cost-conscious
shoppers,
said
it
was
having
trouble
selling
its
most
expensive
items.
Management
cautioned
that
it
was
a
trend
happening
across
the
board
with
home
furnishers.

Retail
sales
data
was
flat
from
March
to
April,
despite
economists
polled
by
Dow
Jones
anticipating
monthly
growth
of
0.4%,
according
to

Commerce
Department
data
released
Wednesday.
Because
this
data
is
adjusted
seasonally
but
not
for
inflation,
it
can
provide
another
signal
that
consumers
aren’t
keeping
up
as
prices
climb.

Economists
are
quick
to
note
that
what
feels
bad
in
the
short
term
for
consumers
can
actually
have
a
silver
lining
in
long
run.
Shoppers
feeling
unable
to
pull
the
trigger
on
bigger
purchases
—
especially
when
paired
with
trends
like
being
more
price
conscious
—
can
offer
justification
for
the
Fed
that
it’s
put
enough
pressure
on
the
economy
to
bring
inflation
under
control
and
clear
the
way
to
start
lowering
rates.

There’s
a
few
other
factors
at
play,
according
to
Mathews,
of
the
retail
industry
trade
group.
The
pandemic
had
a
pull-forward
effect,
he
explained.
Consumers
snapped
up
goods
meant
to
last
several
years
while
they
were
stuck
at
home
during
the
shutdowns.
This
may
still
be
unwinding.

And,
with
a
greater
focus
on
value,
shoppers
may
wait
until
Memorial
Day
or
other
periods
ripe
with
deals,
Mathews
said.

Finally,
a
lot
of
these
big-ticket
items
are
also
connected
in
one
way
or
another
to
people
moving
homes,
Mathews
said.
That’s
bad
news
given
the
chilled
housing
market,
which
has
been
stymied
by

soaring
mortgage
rates.

Residential
solar
company


Enphase
said
any
forthcoming
cuts
to
rates
—
even
if
fewer
than
previously
anticipated
—
should
help
demand
in
states
excluding
California.
(Installers
have
become
more
“flexible”
with
how
they
finance
in
California,
CEO
Badri
Kothandaraman
said,
which
is
considered
a
unique
market
because
of

reduced
credits.)

Whirlpool
cited
hiked
interest
levels
as
a
negative
pressure
on
both
housing
affordability
and
discretionary
spending,
which
are
both
factors
for
consumers
considering
appliances
like
refrigerators
or
washers.
North
American
volumes
were
soft
in
the
quarter,
and
the
company
continued
leaning
on
promotions
to
buoy
demand,
according
to
CEO
Marc
Bitzer.

This
can
bode
poorly
for
retailers
hawking
these
items
like


Best
Buy,
which
is
slated
to
report
earnings
later
this
month.
Bank
of
America
analyst
Robert
Ohmes
told
clients
this
week
to
anticipate
soft
appliance
sales
from
the
Minnesota-based
chain.

Lofty
interest
rates
have
also
hampered
housing
improvement
efforts
for
those
staying
put,
according
to


Home
Depot.
Despite
calling
the
customer
“extremely
healthy,”
finance
chief
Richard
McPhail
said
these

borrowing
costs
have
created
a
holding
pattern
on
projects
like
kitchen
or
bath
remodels
that
began
in
the
back
half
of
2023.

“It’s
not
the
case
of
not
having
the
ability
to
spend,”
McPhail
told
CNBC.
“What
they
tell
us
is
they’re
just
simply
deferring
these
projects
as
given
higher
rates,
it
just
doesn’t
seem
the
right
moment
to
execute.”

Like
many
other
aspects
of
the
economy,
this
negative
trend
can
be
felt

most
deeply
by
those
at
the
lower
end
of
the
income
spectrum.
It
aligns
with
the
view
that
the
U.S.
economic
recovery
out
of
the
pandemic
has
been
“K”-shaped,
meaning
the
experiences
of
different
classes
diverge
like
arms
on
the
letter.

Economic
uncertainty
and
borrowing
levels
have
both
“weighed
heavily”
on
new
swimming
pool
purchases,


Pool
Corp.
CEO
Peter
Arvan
told
analysts
last
month.
But
there’s
a
clear
disconnect
among
income
cohorts:
He
said
lower-end
pools
“remain
a
challenge,”
while
the
pricier
options
have
“steady”
demand.

Troubles
among
the
more
price-conscious
clientele
is
weighing
on
the
Louisiana-based
company.
Sales
to
Pool
Corp.’s
independent
retail
customers
slid
4%
in
the
first
quarter
of
2024.
That
builds
on
the
8%
slip
seen
over
the
last
three
months
of
2023.

Generac‘s
power
generators
are
generally
considered
a
luxury
of
the
financially
well-off.
Because
of
that,
lifted
interest
rates
likely
haven’t
hit
its
clients
as
hard
—
and
any
impact
has
likely
already
been
felt
with
levels
raised
for
several
months,
according
to
CEO
Aaron
Jagdfeld.

“These are homeowners that are just less sensitive to movements in interest rates,”
Jagdfeld
told
analysts
at
the
start
of
this
month.
“Whatever
impact
that
higher
interest
rates
may
have
had
on
the
margins
—
on
the
edges
of
the
market
—
we
think
that’s
largely
baked
in
at
this
point.”

—
CNBC’s
Melissa
Repko,
Gabrielle
Fonrouge,
Jeff
Cox
and
Robert
Hum
contributed
to
this
report.