STAMFORD — U.S. consumers are spending at a brisk rate, and their activity helped the country’s gross domestic product grow at a 4.9 percent annual rate in the third quarter of this year — the fastest such rate since 2021.
But the economy has not entirely recovered from the disruption unleashed by the COVID-19 pandemic, and there is slowing demand for some products and services — as highlighted by the declining quarterly revenues reported in the past couple of weeks by several large Connecticut-headquartered companies. Among the pressures are shrinking savings, rising borrowing costs and still-high inflation, but executives at a number of firms also see signs of consumer resilience.
Nationwide, consumer spending increased by 0.4 percent in September, after adjusting for inflation, according to federal government data. Reflecting that uptick, at Synchrony, the country’s largest provider of store-brand and private-label credit cards, customers’ purchase volume totaled $47 billion in the third quarter of this year — a 5 percent increase over the same period in 2022.
“These results highlight the strength of Synchrony’s differentiated model and resiliency of our business through economic cycles,” Synchrony CEO and President Brian Doubles said during an earnings call on Oct. 24.
Many people are using their disposable income to travel. At Norwalk-based Booking Holdings, gross travel bookings — which comprise the total dollar value of travel services booked by customers, after factoring in cancellations — totaled nearly $40 billion in the third quarter, up 24 percent year over year. (Booking’s brands include Booking.com, Priceline, Agoda, Rentalcars.com, KAYAK and OpenTable.)
“Given current trends, we expect customers… will continue to prioritize travel over other discretionary spend(ing) in 2024,” Booking Holdings CEO Glenn Fogel said during an earnings call on Thursday.
But other companies are seeing demand tail off for some products and services. At New Britain-headquartered toolmaker Stanley Black & Decker, third-quarter revenues decreased 4 percent year over year — a decline that it attributed to lower sales volume for outdoor and DIY products.
“I think (with) the top line next year, we are expecting a similar stable-ish type macro environment with some dynamic elements around it,” Stanley Black & Decker CEO and President Donald Allan Jr., said during an earnings call on Oct. 27. “But it’s really going to depend on our volume next year. It is really going to depend on has the consumer stabilized, and the re-balance between goods and services, and has the outdoor business stabilized post-COVID.”
Wallingford-based electronics manufacturer Amphenol saw its revenues decline 3 percent over year because of “moderations” in the markets for mobile networks, mobile devices, IT data communication, broadband and industrial products and services. But company officials said that growth in markets such as the automotive industry would boost revenues in upcoming quarters.
“We’ve been consistently outperforming the overall auto (market),” Amphenol CEO and President R. Adam Norwitt said during an earnings call on Oct. 25. “I guess when we talk about orders from year-over-year perspective, more broadly in the company, yes, we were this quarter on a year-over-year basis higher in our orders than last year, and that was the first time in four quarters. And I think that that should translate eventually to year-over-year growth.”
There were signs of weakening demand at some home-goods companies as well. Danbury-based furniture retailer Ethan Allen Interiors saw its revenues drop 24 percent year over year in its quarter ending Sept. 30.
“Our sales are impacted due to softening of the economy and the impact of a major flood in our Vermont manufacturing operations. Ethan Allen Interiors CEO, President and Chairman Farooq Kathwari said during an earnings call on Oct. 25.
Still willing and able to spend?
While they are still spending, U.S. consumers continue to face a number of headwinds.
Consumer prices increased 0.4 percent from August to September, below the previous month’s pace of 0.6 percent, according to federal government data. Year-over-year inflation was unchanged in September from a 3.7 percent uptick in August.
Meanwhile, the Federal Reserve continues its campaign to curb inflation, although that initiative might be winding down. After its latest meeting, the Fed announced this week that it would keep its benchmark interest rate at about 5.4 percent, its highest level in 22 years. In March 2022, the Fed launched its most aggressive series of rate increases of the past 40 years, but it has raised rates only once since May.
Among recent developments affecting homeowners, the average rate on the benchmark 30-year home loan this week ran at 7.76 percent, down from 7.79 percent last week — ending a seven-week series of increases, according to mortgage buyer Freddie Mac. A year ago, the rate ran at 6.95 percent. Rising mortgage rates can add hundreds of dollars in monthly costs for borrowers.
As for federal student loan borrowers, they resumed making payments last month, after a freeze of more than three years due to the pandemic.
Many people still have been able to spend significant amounts in the past couple of years because they built up substantial savings as they stayed at home and collected stimulus checks from the federal government at the beginning of the pandemic. But those savings are dwindling. The personal saving rate — which refers to income left over after people spend money and pay taxes — ran at 3.4 percent in September, according to the U.S. Bureau of Economic Analysis. It had rocketed to a record of 32 percent in April 2020.
Synchrony officials said that recent credit delinquency rates were in line with their expectations. For instance, the company’s net charge-off rate for debts that it does not expect to recoup ran at 4.6 percent in the third quarter, compared with 3 percent in the third quarter of 2022.
“We feel comfortable, at the end of the third quarter, that we have the right level of losses,” Brian Wenzel, Synchrony’s chief financial officer, said on last week’s earnings call.
This article contains reporting from The Associated Press.
