Ever since NRF released its 2012 back-to-school survey, which found that spending among families with K-12 students would grow 14% on average to $688 per household, we’ve been fielding questions: Does this mean the economy is coming back? Is this a surefire sign that we’re in the clear? Are consumers out shopping with abandon again?
I wish the answers were yes.
While our back-to-school survey is encouraging news for retailers who are trying to increase sales during the second-biggest shopping season of the year, we can’t look at the data and make the automatic assumption that all is well with the American economy. That’s because two factors are really propelling growth. First, the name of the game for parents this year is replenishment. Families who have spent the last four years patching up holes in blue jeans and trying to squeak out one more school year with the family computer are starting to realize that this is the year some things need to be replaced.
Second, quite simply, there are more kids going to school this year – and obviously a household with two elementary school students will be spending more than a household with just one. (This data can be found both in our survey and from the National Council of Education Statistics, which says the population of school-aged children flat-lined for the last several years and is jumping substantially this year.) While it’s good to see that demand for scissors and glue sticks might be rising, it’s easy to see why this population growth can’t be used as an economic indicator that things are back to normal.
What is “normal,” anyway? Even though consumers are spending more for back to school, their shopping habits seem to be changed forever. While fewer are “making do” with items from previous school years, they’re doing more comparison shopping online to save money and they’re starting their shopping much earlier this year. (One look at the packed back-to-school section at a Target near my house Saturday – never mind that school doesn’t start here for six weeks – and there’s no disputing that data point.)
Mostly these days, the U.S. economy seems a lot like an antique car: When you put the key in the ignition, you’re just never sure if it’s going to start. That’s why policymakers, retail executives, journalists and Wall Street wait anxiously for the latest job data, retail sales data, and consumer confidence numbers. That’s why we all had a bit of hope and optimism when our back-to-school survey results came back from our partners at BIGinsight. But while we’re all ready to put the uncertainty of the past few years behind us, there is nothing to indicate that this situation will lift anytime soon.
While retail sales in the first half of the year grew 4.5%, largely due to an unseasonably warm winter which had us all out buying lawn mowers in February, NRF continues to forecast retail sales growth of 3.4% this year. Anticipated weak income growth, a stagnant unemployment rate, and consumer confidence remain concerning, though it does appear from recent news that the housing market is starting to bounce back and lower gas prices are always welcome news.
As our chief economist told me last week, “Consumers have the capacity to spend. The question is, will they?” Unfortunately, while it seems parents will be opening their wallets for back to school, we can’t completely answer that question with the data we have. Because while $84 billion in spending will certainly be a much-needed boost to the U.S. economy, there’s no telling whether shoppers will be snapping their wallets shut again when the backpacks and blue jeans and box of tissues are all laid out for the first day of school.