March Consumer Outlook

The short-term outlook for consumer spending has improved - if only modestly - as Spring approaches and tax refunds begin to hit mailboxes, according to results from the latest Retail Forward Monthly Shopper Update™ Survey. "The first wave of tax refund checks, with amounts that are tracking significantly higher than last year, appears to be lifting some of the caution that has persisted in recent months," said Steve Spiwak, an economist with Retail Forward.

This month's survey also suggests that many consumers are sticking with New Year's resolutions to eat better. Most consumers are keeping healthy food options top of mind. However, many cited obstacles to better eating, such as price and taste, that often restrain them from making the more healthful choice. Results also show that convenience plays an important factor when choosing what foods to buy.

More Money in the Checkbook

Expectations for consumer spending over the next month posted a modest bounce compared with last month's survey. Middle income households (between $25,000 and $75,000) turned in the strongest improvement. These households are benefiting disproportionately from new provisions for marriage penalty relief and higher child credits implemented as part of last year's tax legislation - resulting in fatter refunds.

In contrast, more affluent households have tempered their spending plans somewhat in response to a stock market that appears to have leveled off following a strong surge over the past year.

• Compared to spending at this time a year ago, 18% of all households plan to spend more this month. That is an improvement over last month, when 16% of households reported plans to spend more.
• Among middle-income households, 19% plan to spend more. That is up from the 16% that reported stronger spending plans in February. Moreover, the percentage planning to spend less in March dipped to 26% from 29% the month before, adding additional impetus to the anticipated spending pace.
• The proportion of upper income households ($100,000 and over) planning to spend more in the month ahead slipped slightly to 19% from 21%. However, that falloff was offset by a similar decrease in the proportion planning to spend less.

Healthier Eating?

With the influx of new diets, many of them emphasizing low-carb foods, consumers now have to face more definitions of "healthy eating". Survey results show that large percentages of Americans are trying to eat more healthily, and that equates to an increase in planned purchases of low-fat, fat-free, and low-carb foods. "The search for youth among ageing Baby Boomers is a key driver behind the growing interest in new diets - mad-cow disease and avian flu notwithstanding," according to Spiwak.

• More than half (57%) of respondents agree that they are "consciously buying healthier foods." That is much greater than the percentage that disagree (12%).
• However, many indicated they would eat healthier foods more often if they were less expensive (52%), easier to prepare (37%), or tasted better (37%).
• Also, 37% of consumers said they are buying more low-fat or fat-free products than they did a year ago and 32% agree that they plan to buy more low-carb products in the next six months than they did in the past six months. Consumers between the ages of 35 and 54 were much more likely (35%) than other age groups to have plans to buy more low-carb food.
• Fifty-one percent of households agree that speed and ease of preparation are among the most important considerations in deciding what foods to buy.

Source: Retail Forward press release, March 04, 2004
Retail Forward, Inc. is a global management consulting and market research firm specializing in retail intelligence and strategies.