Discretionary spending could be headed for a comeback

There have been some positive signs lately for discretionary spending.

At one major retailer, for example, more discretionary categories had a better month than essentials. The latest monthly sales data from Costco showed non-food categories increasing in the mid to high single digits in June, outpacing food and sundries, which increased in the mid-single-digit range. Jewelry, major appliances, and gift cards fueled the uptick, with overall sales rising 8% year over year.

The trend could be more widespread than the popular warehouse store: Deloitte’s ConsumerSignals report pointed toward a slight recovery in discretionary spending while also acknowledging there is still room for improvement.

“Mirroring the bounce in financial sentiment, discretionary spending intentions saw the first uptick in nine months, but remain well below 2021 levels,” Deloitte Managing Director Stephen Rogers wrote in a blog post. 

Discretionary spending was down 19.9% from 2021 in July, up from -22.1% in June and from a low of -32.9% in November 2023.

Looking ahead, Inmar Intelligence is predicting that consumers will prioritize discretionary spending this coming holiday season, and will seek savings on groceries and essentials to cover the costs.

“Consumers indicate that certain categories are non-negotiable for the holidays, even if it means cutting back elsewhere,” the report stated.