Grocery Spending Steady in March
Consumers may be clutching their real and digital wallets a little tighter in the wake of high inflation and uncertainty about the direction of the overall economy, but they are maintaining their grocery spending.
According to fresh data from the U.S. Census Bureau, advance estimates of overall U.S. retail and foodservice sales in March were down 1% from the prior month – more the expected 0.4% decline – but still 2.9% higher than in March 2022. In the grocery sector, estimated sales actually went up slightly in March to $72.91 billion from $72.88 billion in February. Last March, those sales totaled $69.23 billion. From another angle, grocery sales topped $210.1 billion for the first three months of 2023, a 5.6% gain over the first quarter of 2022.
[Read more: "Food Inflation Finally Easing"]
On a percentage basis, March grocery sales came in virtually flat, with the Census Bureau reporting a 0.0% change from February to March. On a year-over-year (YoY) basis, grocery sales were 5.3% higher than the previous March.
Inflation may have contributed to the grocery sales uptick last month, but analysts note that there is more to it than that conclusion. “Brick-and-mortar grocery spending continues to rise YoY and while we could point the finger at inflation, the Bureau of Labor Statistics reported a 1.8% growth in jobs following February's 2.5% job growth in grocery, a sign that more consumers are shopping in-store enough to constitute increased grocery hiring,” Piyush Patel, chief strategic business development officer at software firm Algolia told Progressive Grocer.
Patel also expressed a level of optimism about grocery spending, even as the Fed debates another rate hike and as the market keeps a wary eye on the health of banks. “Social gatherings are starting to pick up as the weather starts to get warmer. And, with the official kick-off to summer, Memorial Day Weekend, and the Fourth of July just around the corner, we can anticipate that grocery sales — particularly spirits and summer foods like hot dogs — will spike even more,” Patel said.
Chip West, a retail and consumer behavior expert at Vericast, said that the toll of inflation and general consumer wariness may open up other avenues for grocers. “We’ve also seen restaurant prices beginning to outpace grocery prices, providing grocers with an opportunity to compete for more spend. In fact, Vericast’s 2023 Restaurant TrendWach Report found that 64% of consumers feel that dining out has become too expensive,” West said.
Still, he advises, lots of things can change in such a fluid macroeconomic climate. “However, restaurant commodity and labor costs are starting to ease, and menu prices will start to moderate moving forward. In the coming months, grocers will need to continue to deliver not only savings but value to win over customers,” West remarked.
As grocery sales hold steady for now, other industries and categories within retail are seeing contractions. Home goods and furniture spending is down, which doesn’t come as a major surprise since those expenditures and investments went up during the stay-at-home part of the pandemic in 2020 and into 2021. “Now, consumers are prioritizing experiences and only essential household needs,” Patel observed.
Likewise, West emphasized the potential for tapping into consumers’ penchant for doing things. “We know that investing in experiences is high on consumers’ lists, and with improving weather coming for most – Mother’s Day, graduations, proms and weddings, are just some of experiences we typically look forward to spending on,” he told Progressive Grocer.
