SCOTT SIMON, HOST:
How strong is the U.S. economy? Jobs numbers are up, but so are prices. And a lot of the health of the economy is determined by how much we spend and what we buy. NPR's Alina Selyukh is keeping tabs on the consumer side of the question and joins us now. Thanks so much for being with us.
ALINA SELYUKH, BYLINE: Good morning.
SIMON: We know Americans did a lot of pandemic spending. Does that seem to be over, at least on pause?
SELYUKH: Well, you know, people are still spending more than before the pandemic. But this week, we did learn that the U.S. economy shrank for the second quarter in a row, which has people on edge about a possible recession. One big reason economists cited had to do with something unusual happening at stores. They have too much of certain things. You can call it glut or bloat or whatever term of discomfort.
This last two years, we shopped like crazy for things like TVs, blenders, sweatpants. Sellers and makers had to predict future sales months in advance, and they basically overstocked because pretty suddenly their shoppers are traveling, going out. They don't need another TV. And so businesses with all this old stuff to sell are now more cautious ordering new stuff. I've talked to a toymaker, for example, who said one retailer totally rescinded an order for next year. And that shows up as an economic slowdown.
SIMON: Consumer spending makes up two-thirds of all economic activity in the U.S. Certainly, inflation would be cutting into that.
SELYUKH: Yeah, there's this very interesting divergence happening on that. There's people's ability to spend and willingness to spend. And if we talk about ability, data show higher wages, low unemployment, people's savings levels - generally healthy. We're seeing a ton of travel, going out to eat. But then you get to how people feel, and shoppers are anxious about rising prices. Inflation is at a 40-year high, and this changes how people shop. They're switching to cheaper brands, keeping eagle eyes on sales. I've been talking to parents stocking up for back to school. One of them is Chavis Watford from South Carolina, and she's shopping for four teenagers and says this year, she's starting to really budget.
CHAVIS WATFORD: I'm kind of being forced to because what you think that you would have spent, you end up spending more. So it's dipping into another category, maybe groceries or gas.
SELYUKH: She even says, for the first time, she decided to grab some free school supplies from a county fair.
SIMON: How are retailers doing through all this?
SELYUKH: They're doing OK. This week, we did hear Best Buy say people are buying fewer electronics because of inflation. Walmart says it's had to keep lowering prices for things like clothes because people are spending so much on food they aren't as interested in aisles beyond groceries. Amazon this week said very specifically that it has not seen any impact of inflation on its shoppers' habits, but it did acknowledge that the online shopping frenzy we saw during the pandemic has cooled off.
Big brands like Unilever and Procter & Gamble have raised prices citing higher costs of aluminum, plastics and gas. And these companies make things like Dove soap, Tide detergent, Pampers diapers, and they say they have noticed shoppers buying less though not dramatically so quite yet. And we did hear Coca-Cola say it's actually been selling more soda, and Unilever has been selling more ice cream. Whether that means we're stress eating or having a good summer, I don't know.
SIMON: NPR's Alina Selyukh, thanks so much for being with us.
SELYUKH: Thank you. Transcript provided by NPR, Copyright NPR.
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