One thing moving markets 

… is the emptier shelf at wholesalers. 

When warehouses across the country have a decline in inventory, it may signal a slowdown in demand, and often correlates with a decrease in economic growth. In March, wholesale inventories fell 0.4% month-over-month and 2.1% annually.¹ 

In April, consumers spent an average of $815 on general merchandise, according to anonymized user data from Empower Personal Dashboard^TM. That’s slightly down from 2022 ($886) and 2023 ($875). 

When consumers are purchasing less, sales at wholesalers tend to pull back. As a result, inventories scale back with them. While it can be an imperfect measure, inventories are often seen as bellwethers for the overall state of the consumer and the projected path of future demand. 

Where do wholesalers stand?

On the bright side, this trend can be partly attributed to the historically high inventories of 2023 coming back into balance as retailers return to the pre-pandemic just-in-time model. On top of that, retail inventories increased 0.3% in March and 4.4% annually. Consumers generally purchase their goods from retailers, so this could be a sign demand is still alive.  

However, retailers generally purchase their goods from wholesalers, which could suggest elevated demand is in its final innings but has yet to show in the data.  

Why America’s largest merchants matter 

Consumer spending accounts for roughly two-thirds of the U.S. economy, so spending and inventory activity at the largest merchants is often indicative of broader spending trends and the overall health of the consumer. 

Demand for goods surged during the pandemic, but in its wake, retailers struggled to maintain adequate inventories. That eventually led to an inventory glut that helped drive goods inflation lower in 2023. But now, companies are shedding those inventories, leading to a 0.35% drag on the most recent Q1 GDP numbers.² 

The big picture from big names 

Walmart, Amazon, and Costco collectively reported around $1.16 trillion in retail sales in 2022.3 Because of this, these companies can provide crucial context to consumer demand as well. 

In Q4 2023, Amazon reported a record holiday shopping season,4 and notably, the company’s inventory levels in the first quarter saw a near-fivefold increase.^5, 6 

It’s still too early to say if the overall retail landscape is showing serious signs of slowing, but these signs warrant a closer look. The ongoing first quarter earnings season and next quarter’s results should hold more clues regarding the future of consumer demand. 

And a few top headlines 

Retailers have been cutting prices on thousands of products to entice consumers who have become more price sensitive due to inflation.⁷  

• Big chains like Ikea and H&M are among those dropping prices, which could translate to bargains for consumers. 

According to a report from the FBI, scammers stole $3.4 billion from older Americans last year, often using cryptocurrency.⁸ 

• Over 12,000 victims aged 60 and older were defrauded through such scams, underscoring the importance of financial vigilance. Call center and tech support scams were the most common. 

Peacock is increasing prices for its streaming service by $2. It’s ad-supported tier will cost $7.99 per month and its ad-free tier will cost $13.99 per month, with the new rates set to take effect ahead of the 2024 Summer Olympics.⁹  

• Peacock may be the only option to view this year’s Summer Olympics, making this price increase part of the price of admission to watch the games. 

According to a New York Fed survey, renters who believe they’ll be able to buy a home hit a record low: 13.4%.¹⁰ 

• The median home price in February was $388,700 while the average monthly housing payment was $2,040. Rental costs are also expected to increase 9.7% over the next year. 

Due to the largest spread of bird flu in U.S. history, egg prices have risen to roughly $3 a dozen.¹¹ 

• Compared to August when a dozen eggs cost about $2, the current price is expected to surpass last year’s average. However, it remains well below its high of $4.80 in January 2023. 

What to be on the lookout for next week 

CPI inflation data for April will be released on Wednesday, May 15. The previous month showed prices increasing 3.8% annually, well above the Federal Reserve’s target 2% rate. 

All this talk of inflation may be deflating, but it remains a top concern for policy makers and the economy, especially after a slew of hotter-than-expected reports through the first quarter. At its last policy meeting, the Fed acknowledged the less-than-ideal inflation data, which may force the central bank to further delay its interest rate cuts. 

The silver lining: Fed Chair Jerome Powell said he believes a hike is unlikely, despite a growing fear among investors that it may be necessary to return inflation to the 2% target. If last quarter’s data proves to be a blip on the radar, these fears may abate. But another sticky reading from next week’s CPI report could be the tipping point to officially bring hikes back into the conversation, and potentially act as a major headwind for equities and tailwind for bond yields, which are already on a path back to their highs made in late October. 

That said, the important thing for this next report is progress, not perfection. The growing fear in markets has largely stemmed from the rate of inflation accelerating. A move lower, small or otherwise, could be all that’s needed to rebuild confidence.