Post-Pandemic Spending: Why Big Ticket Items Aren’t in Demand
Shrinking Demand
March’s consumer spending data will be released on Friday, after the most recent report showed a decline in the purchase of big-ticket items. In February, spending on things such as motor vehicles and home furnishings fell, and price pressure is likely a factor, with inflation at its highest level since the early 1980s.
Generally speaking, economists say that spending has started to shift away from goods and into services. With COVID-19 lockdowns largely in the rearview mirror, demand is spiking for travel, entertainment, and dining out at restaurants. In addition, a large number of consumers bought long-lasting items during the pandemic’s early stages, lowering demand for things like home furnishings and appliances.
Dishwashers and Refrigerators
Appliance maker Whirlpool (WHR) reported sales were down 8.2% in its first quarter, and also cut back its guidance during this week’s earnings call with analysts. Throughout the pandemic demand has remained strong for items like dishwashers and refrigerators, and spending on those items remains higher than pre-pandemic levels. That has often left companies struggling to ramp up production, leading to shortages and price increases.
Whirlpool says demand is now slacking, all while inflation has driven its operating costs higher. After previously predicting the North American appliance industry would expand by 3% this year, Whirlpool is now anticipating growth to be flat.
Mattresses Lose Momentum
Mattresses are among the big-ticket items that have experienced diminished demand in recent months. This is according to major sellers, including Sleep Number (SNBR) and Tempur Sealy (TPX). Analysts argue the broader trend is toward a sustained drop in spending on durable goods.
Analysts say that mattresses are a good early indicator because it’s an easy purchase to put off. They don’t break, but rather wear down, and tend to be forgotten once people have gotten out of bed and started their day. With consumer confidence declining and inflation up, vendors of big-ticket items are feeling the squeeze. It doesn’t mean spending will fall off a cliff, but it could shift elsewhere.
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Published at Wed, 27 Apr 2022 07:00:37 -0500
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By Salzburg Global Seminar on 2022-04-26 10:25:31