Our U.S. Thematic and Equity Strategist Michelle Weaver discusses
what back-to-school spending trends reveal about consumer
sentiment and the U.S. economy.
Read more insights from Morgan Stanley.
----- Transcript -----
Michelle Weaver: Welcome to Thoughts on the
Market. I’m Michelle Weaver, Morgan Stanley’s U.S. Thematic and
Equity Strategist here at Morgan Stanley.
Today -- we're going back to school! A look at the second biggest
shopping season in the U.S.. And what it can tell us about the
broader market.
It’s Friday, August 8th, at 10am in New York.
It's that time of the year again. With parents, caregivers and
students making shopping lists for back-to-school supplies. And
it’s not just limited to school supplies and backpacks. It
probably also includes laptops or tablets, smart phones and, of
course, the latest clothes. For investors, understanding how
consumers are feeling—and spending—right now is critical. Why?
Because back-to-school spending tells us a lot about consumer
sentiment. And this month’s data has been sending some mixed but
meaningful signals.
Let’s start with the mood on Main Street. According to our latest
proprietary consumer survey, confidence in the economy is
sliding. Just under one-third of consumers
think the economy will improve over the next six months—which is
down from 37 percent last month and 44 percent in January. And
that’s a pretty big drop from the start of the year. Meanwhile,
half of all consumers expect the economy to get worse.
Household finances are also feeling the squeeze. While around 40
percent expect their financial situation to improve, closer to 30
percent expect it to worsen. The net score is still positive, but
down from last month and even more so from January.
The takeaway? Consumers are feeling the pinch—and inflation
remains their number one concern.
We did see a bit of a brighter picture though around tariff
fears. And tariffs are definitely still a worry, but we’re past
that point of peak fear. This month, over a third of consumers
said they’re “very concerned” about tariffs—down from 43 percent
in April, post Liberation Day. And fewer people are planning to
cut back on spending because of them: that number is just 30
percent now, compared to over 40 percent a few months ago.
In fact, almost 30 percent of consumers actually plan to spend
more despite tariffs. That’s a sign of resilience—and perhaps
necessity—as families prepare for the school year.
And that brings us back to back-to-school shopping, which is a
relative bright spot.
Nearly half of U.S. consumers have already shopped or are
planning to shop for the school year—right in line with what we
saw in previous years. Among those shoppers, 47 percent are
spending more than last year, while only 14 percent plan to spend
less. That’s a significant net positive at 34 percent.
What’s in the cart? More than 90 percent of shoppers are buying
apparel, footwear, and school supplies. Apparel leads, followed
by footwear, followed by supplies.
If we look beyond the classroom at other things people are
spending on, travel is still a priority. Around 60 percent of
consumers plan to travel over the next six months, with visiting
friends and family as the top reason. That’s consistent with
where we were a year ago and shows that experiences still
matter—even in uncertain times.
The big takeaway from all this data: Consumer sentiment is
cooling, but spending—especially spending for seasonal needs—is
holding up. Back-to-school categories like apparel and footwear
are outperforming, making them potential bright spots for
retailers.
As we head into fall, keep your eyes on U.S. consumers. They’re
not just shopping for school—they’re also signaling where the
market could be headed next.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.
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