Stores

Online inflation falls, GDP grows, and Visa says consumers are ‘resilient’

Recession debate continues, as consumer spending buoys economy.
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Javier Ghersi/Getty Images

· less than 3 min read

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.

The holidays are rapidly approaching, and right on schedule, economists are pondering their favorite $27.62 trillion question: Is the US economy headed for recession? Or will the post-pandemic boom continue?

According to an advance estimate, the latest GDP numbers show the US economy growing at an annual rate of 4.9% in Q3 2023—up from 2.1% in the second quarter and potentially marking the biggest increase since late 2021.

Retailers might be happy to learn that the increase in GDP reflects, in part, an uptick in consumer spending on both goods and services. But don’t get too excited. Nondurable goods such as prescription drugs were a major contributor to the increase, though recreational goods and vehicles also played their part.

  • On another positive note, higher investment in private inventory bolstered the number, which reflects strength in both “manufacturing and retail trade.”

Yet some economists don’t see the good times lasting. Nationwide Chief Economist Kathy Bostjancic noted in a research brief that this level of GDP growth might not be sustainable, as the personal savings rate declines, employment gains slow down, borrowing rates increase, and inventory accumulation moderates.

“We forecast a slowing to around 2.3% in Q4, but that is heavily dependent on an easing in employment and income gains,” she wrote. “That in turn determines the strength of consumer spending, which likely remains the main driver of GDP growth.”

Consumers still have the juice: If that’s the case, then Visa has some good news. The credit card company reported a strong quarterly performance on the back of continued consumer spending.

“Throughout the year, we have seen resilient consumer spending,” CEO Ryan McInerney said in the company’s latest earnings release.

On a call with investors, CFO Chris Suh also noted that Visa is “assuming no recession in our outlook” and that Q4 trends are expected to continue throughout the year.

Digital discount: A further sign that consumer demand may hold steady is the continued decline in inflation. The latest numbers from Adobe Analytics Digital Price Index show that online prices fell 4.6% year over year in September to a 41-month low. This includes declines in key product categories such as appliances (down 7.6% YoY), electronics (down 11.9%), and computers (down 12.2%).

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.