August was the biggest jump in U.S. retail in over a year, up more than 2 percent compared to July, largely on the basis of the Cash for Clunkers program that gave select customers a government incentive to trade in their old cars. Sales were down only about 5 percent from the year before. This shows that, despite declining incomes, consumers aren’t giving up on the idea of shopping.
At the same time, though, card transaction volumes fell 8 percent according to MasterCard, as consumers used both debit and credit cards less than in July. I believe this shows two things. First, consumers are feeling safer spending cash than paying with a credit or debit card, at least for smaller purchases, an idea I had suggested in June. With more cash purchases, there are fewer card purchases. Second, consumers are making fewer shopping trips. With fewer visits to stores, people have fewer purchase transactions, even if they end up buying the same things.
Retailers will want to know whether the move away from shopping is a trend, and it is too soon to say. Part of the decline in shopping trips can be attributed to flu. A peak number of people, especially students returning to school, had flu in the second half of August. People with flu and members of their family might minimize shopping trips to reduce the risk of spreading the flu virus, or because they are busy with trips to the doctor, or just because they don’t feel like shopping. Others might stay home more often to reduce their risk of contracting flu. Flu appears to have peaked around September 1, so the customers who were kept home by flu will be coming back to the stores soon enough. Flu affected perhaps 3 percent of U.S. households in August, so it can only account for a fraction of the reduction in shopping trips.
The other explanation is the one that retailers are afraid to think about. Americans may be getting out of the shopping habit. It could be that people are too busy to go shopping, don’t find it so much fun anymore, are afraid they will spend too much, or are just running out of money. If retail results for September and October confirm that people aren’t going shopping the way they used to, it will be an advance warning of another retrenchment at retail coming up right after the Christmas season.