Consumer buying intentions slip, but interest in Internet remains strong

After registering its strongest growth in six years in the first quarter, Retail Forward Inc.’s Future Spending Index retreated significantly in May, to 95.9 from 107.5 in April. Interest in online shopping stays strong, however as consumers told Retail Forward surveyors they plan to spend more time online locating stores, researching products and viewing circulars.

"In the first quarter, retail sales registered their strongest growth rate in six years," said Steve Spiwak, an economist with Retail Forward. "This month`s downshift in the Future Spending Index means growth in the near term should lose some luster as the effects of higher energy prices, rising interest rates and the downtrend in home buying ripple through the economy."

The survey found that in the last six months 50% of consumers had shopped at a web site of a retailer that did not have a store near them. 44% used a web site to locate a store, 38% had looked at a store’s ads online, 27% to find out what was in stock at a nearby store, 13% to use a gift registry and 6% accessed a site while shopping in that retailer’s store. The proportion of consumers who used web sites in those ways varied only little among down-market, middle-market and up-market consumers.

“Retailers continue to apply lessons learned from the early days of e-retailing to improve the functionality of their web sites, and consumers are responding. More than eight out of 10 primary household shoppers (85%) take advantage of retailers` web sites and the expanding array of features they have to offer,” Retail Forward said.

Retail Forward reports that the Future Spending Index decreased from the prior month for each of the key income segments.
• The index for down-market households (incomes less than $22,500) turned in the largest monthly decline among the three income segments, falling from 116.2 in April to 98.9 in May. Slipping job security and income growth helped push the index lower. Additionally, higher interest rates have taken a toll on home buying, refinancing activity and debt loads, contributing to the weaker outlook for this segment.
• Middle-market households ($22,500 and $75,000) are being strained by the same factors. Assessments of jobs and incomes are more pessimistic, while home buying has moderated and debts have become more of a burden. As a result, the index for this segment declined to 97.3 from 104.4 in April.
• Even up-market households (greater than $75,000), which are better able to bear economic stresses and strains, expressed concern about near-term spending plans. Dampened by heightened worries about the job outlook and stock market performance, the index decreased from 107.6 in April to 93.3 in May. The drag of higher debts also played a factor.

On Mothers Day spending, more than half of consumers (54%) expect to spend as much as they did last year, while 10% expect to spend less, 8% more and 28% to spend nothing at all.