CNN —
Consumers splashed out on back-to-school shopping last year, spending a record $41.5 billion, according to estimates by the National Retail Federation.
That massive figure of more than $890 per household was about 12% higher than the previous record for 2021. Rising prices certainly played a role, but a strong labor market, slowing inflation and optimism about the U.S. economy’s ability to recover also contributed.
Consumers have been calmer this year. Though higher-than-normal inflation has largely subsided, they are feeling the compounding effects of rising prices and are pulling back on spending to weather an expected but uncertain economic slowdown.
Still, with ample evidence, the NRF projects back-to-school spending in 2024 will be the second-highest on record at $38.8 billion, or $874.68 per household.
How much of that happens could be an important barometer not just of how people are spending, but also of the health of the consumer-driven economy.
“There still seems to be a lot of willingness to go out and spend money,” Mark Matthews, executive director of research at the NRF, told CNN.
People have become “very price sensitive,” he added.
Bargain hunting and cheap supplies
At other times of the year, items such as stationery, clothing and electronics would fall under the category of discretionary spending.
And broadly speaking, the biggest declines in spending were in discretionary and high-value spending.
But back-to-school seasons are unique.
“Back to school isn’t an optional event. It’s a necessary expense,” Matthews says. “If you’re sending your kid off to college, you’re going to have to buy furniture. Kids are going to keep growing, so you’re going to have to buy shoes.”
While consumers can’t cut back on spending on essentials, they can save money: About 41% of respondents to the NRF survey said they are looking for bargains.
“Consumers are definitely looking for deals,” he says, “and retailers are realizing they really need to promote to price-conscious consumers.”
The shifting tide of inflation is likely helping matters. While the pace of price increases remains faster than normal, Consumer Price Index data shows that it is service-based sectors, specifically housing-related services, that are exerting upward pressure on prices.
Smoother supply chains and consumers’ penchant for spending on services and experiences have led to disinflation (prices rising but at a slower pace) and deflation (prices falling) in product categories.
Retail prices are expected to rise 5.9% in 2022 and fall 0.7% this year after rising 0.6% last year, according to an analysis published last week by economists at S&P Global Market Intelligence.
Some commonly purchased school supplies are cheaper than last year, and some are even below 2019 prices, according to monthly retail tracking data from market research firm Circana.
Sticky notes are down 22% compared to the same time last year, paper is down 20%, and crayons and pencils are down 19% and 13%, respectively. Crayons and sticky notes are also down 7% and 12% compared to 2019 (while other categories are up at least 11%), Circana’s data shows.
Average hourly and weekly wages have outpaced inflation for more than a year, according to data from the Bureau of Labor Statistics, spurring buoyant consumer spending that drives the economy.
As a result, back-to-school spending should remain roughly in line with last year, Duleep Rodrigo, U.S. consumer and retail leader at KPMG, said in an interview with CNN.
“We were surprised to see more positive sentiment from consumers when it comes to fall shopping,” Rodrigo said of the accountancy firm’s latest consumer survey.
In many cases, this is a reversal from the summer survey, when the outlook looked much bleaker, and the rise is being driven by rising expectations of interest rate cuts and discounts, he said.
He also said this could bode well for the all-important holiday shopping season.
“They’re much more optimistic when it comes to spending,” he said.
For some families, spending, especially back-to-school spending, certainly looks very different than in years past.
In Shoreline, Washington, Amanda Weber and her family have been struggling financially for quite some time.
Most of the family’s savings have been used to pay medical bills related to Weber’s brain surgery earlier this year. Though he is recovering well and is expected to return to work soon, it has taken a big hit to their monthly budget.
The family is saving money by shopping at Costco more, buying in bulk at the butcher, preparing meals well in advance and unplugging the air conditioner to cut energy bills.
Back to school shopping is no exception.
“I’m on the hunt for a bargain,” Weber said, adding that she’s been finding coupons online, comparison shopping more, scouring clearance racks and getting more involved in “buy nothing” groups in her neighborhood.
She and her husband even cut and reused paper from a black-and-white marbled composition book they had on hand.
So the money spent was actually quite targeted, Weber said, noting that most of it was used to buy his 16-year-old daughter clothes for interviews and presentations.
“I think the shoes were the most expensive thing,” said Weber, 49.
Lisa Castourita, 46, of Gainesville, Florida, and her teenage daughter live by a simple mantra: do more with less, or make do with what you have.
“People have to be smart about what they do and the actions they take,” Castulita told CNN. “Older generations have done so much with so little.”
The pandemic and the ensuing personal and financial upheaval marked a turning point for Kasturita, whose husband died in 2021 from COVID-19.
“Years ago, I had more support and more income, so everything was new, new notebooks, I only bought the best,” she said. “You really see that when you’re a single parent or single income family. All of these (price increases) add up and it becomes a big burden. I’m a widow and I feel like I should have taken a smarter, more cautious approach.”
As her daughter starts Grade 11, Kasturita said she plans to avoid the over-preparedness of previous back-to-school seasons.
“One of the things I realized is that we were reinventing the wheel and going into debt for no reason,” she said. “I was spending money on a lot of different things, and 50 percent of it was never spent.”
In addition to harnessing resources, hunting for bargains and shopping at thrift stores, Kasturita said her friends and family, whom she affectionately calls her “buddies,” have been invaluable, sharing gently used clothing, haircuts and school bags for free, at a discount or in exchange for services.
As a result, Kasturita estimates she will spend 60% to 70% less at retail stores this back-to-school season than in previous years, and said cutting back on unnecessary expenses will allow her to spend more on enjoying life experiences with her daughter.
“In today’s economy, we can’t do the things we used to,” she says. “It’s about making lifestyle changes. Making smart, intelligent, evidence-based decisions can improve your life.”
