Americans' spending (which has been up in 2023) will help shape the economic future
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The new year came with a lot of new spending for folks across the country who bought more cars, clothes and restaurant meals. But businesses aren't sure how long that spending spree will last. There's a lot riding on the answer because consumer spending is by far the biggest driver of the overall economy. NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: Warmer-than-usual weather in January seemed to give shoppers a second wind. People flocked to car dealerships, home improvement centers, even department stores last month. Restaurant sales jumped more than 7%. That's welcome news for Ohio-based restaurant owner Cameron Mitchell, who operates dozens of eateries in 14 states ranging from high-end steakhouses to casual Mexican fare. But Mitchell's not counting his chicken dinners just yet.
CAMERON MITCHELL: I'm still optimistic at this point in time. But I'm anxious to get another month under our belt.
HORSLEY: Mitchell has noticed that customers seem to be gravitating to his lower-priced restaurants. He's decided to skip his usual spring price increase. That's partly because food costs are finally leveling off but also because he worries that after nearly two years of high inflation, customers are feeling tapped out.
MITCHELL: That's just what my gut is telling me as an operator - that we've kind of come to the end of that road. I mean, people a year ago - they knew. They knew we had to raise our prices. It was obvious, and they were accepting of that. But I think people want inflation to come down, and I think they are not as tolerant anymore of price increases.
HORSLEY: The nation's largest retailer told a similar cautious story this week. Walmart is expecting only modest sales growth this year. CEO Doug McMillon says shoppers are buying essentials like groceries but skipping other, more profitable merchandise.
DOUG MCMILLON: Customers are still spending money. It's obviously not as clear to us what the back half of the year looks like.
HORSLEY: The Federal Reserve has been trying to get shoppers to slow down by raising interest rates in an effort to curb inflation. Economist Ian Shepherdson of Pantheon Macroeconomics says the Fed's efforts are working despite the apparent rebound in January sales.
IAN SHEPHERDSON: I think the trends are, from the Fed's perspective, quite favorable. Economic growth is slowing. Inflation is falling. But these things never happen in a straight line.
HORSLEY: Right now the economic roadmap seems particularly curvy. Lots of people have jobs and money in their pockets. But prices are high, and overdue payments on car loans and credit card bills are starting to creep up. People are spending less money on big-ticket items but more money on services such as car repair and travel. Vacation travel to Las Vegas is setting new records, according to Steve Hill, who heads the city's convention and visitors authority.
STEVE HILL: People realized what they were missing during COVID. I think it has driven a real energy around getting back to experiences. And we see, and I'm sure you do as well, in the numbers a shift from buying stuff to buying experiences.
HORSLEY: Restaurant owner Cameron Mitchell is betting on that. He's planning to open about half a dozen new restaurants this year, including a steak-and-seafood venue overlooking the Las Vegas Strip.
MITCHELL: We feel pretty good about things. If there is a recession, I don't think it's going to be a deep one. All signs point to not being a deep one. Yes, there - it's a little bit of uncertainty out there. But on the same token, the opportunities we have in front of us, we think, are really well-founded, and we're excited to bring them on board.
HORSLEY: But Mitchell is also watching his own pennies. Some of his new outlets are taking the place of restaurants that closed during the pandemic, which helps to keep a lid on spending. Scott Horsley, NPR News, Washington.
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