Set against solid consumer fundamentals but deteriorating consumer sentiment, the result saw current-dollar back-to-school sales rise 9.2%, retail inflation at an uncomfortable 5.9%, and real sales just 3.1% higher than the year before. Last year saw inflation and inventories take off: first, as Russia's invasion of Ukraine sent food and energy costs soaring, and later, as supply-chain bottlenecks eased, and retailers rushed to re-build inventories. The second part of the story this year is the normalization of retail inventories following the supply chain disruptions that contributed to inflation and characterized so much of consumer spending in 2022. Consumer prices broadly rose 8.0% in 2022 and are expected to rise 4.1% this year but are less driven by unmet demand for goods as they are the rising cost of rents and services. Part of that decline reflects softer demand. Part of the story is the dramatic decline in inflation on back-to-school retail sales, which we estimate will fall from a rate of 5.9% last year to just 0.3% in 2023, roughly in line with the decline in total retail inflation. That's enough to earn a "passing" grade in our forecast. While far from the best year on record, real retail sales - current-dollar sales adjusted for the change in retail prices - are expected to grow 1.5% in 2023, below trend yes, but better than the broad slowdown many were expecting. This year, thanks to renewed consumer confidence and rising incomes, back-to-school sales are forecasted to grow 1.8% to $978 billion. In 2022, retailers hauled in over $960 billion in sales ahead of the new school year (up 10.9% from 2021), dominated by spending on books, supplies, clothing, footwear, computers, software, smartphones, and tablets. The back-to-school shopping season is the second-most-important time of year for many retailers, behind only the winter holidays. ![]() Combining our forecast of consumer spending and data on international shipping shows what that means for back-to-school sales. The slowdown in spending follows three years of surging sales, but last year's inventory hangover and this year's softening demand have retailers less willing to raise prices in 2023. ![]() The back-to-school shopping season is looking softer this year but still earns a "passing" grade in our forecast, as strong wage growth and easing inflation are enough to keep real income gains positive and retail sales growing.
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