Why retail remains stronger than headlines suggest

Retail sales remain strong, consumers are still spending and yet economic anxiety continues to dominate headlines. NRF Chief Economist Mark Mathews joins Retail Gets Real to unpack the contradictions shaping today’s economy, from record-low consumer sentiment to resilient retail performance.

Why consumers keep spending

Consumer sentiment may be near historic lows, but Mathews says spending patterns continue telling a very different story. That disconnect between how consumers feel and how they behave has become one of the defining economic trends of the post-pandemic era.

Mark Mathews, Chief Economist; Executive Director, Research, NRF

While constant pressure from the pandemic, inflation and geopolitical conflict has damaged confidence and created economic pessimism, consumer spending has remained strong.

"Consumers have a lot coming at them, but the reality of the matter is that fundamentally, financially, they're not in bad shape," Mathews says. "So we have to separate this psyche from the ability to spend. Consumers have had the ability to spend, and they've been spending."

Pandemic-era excess savings created an early cushion during periods of high inflation, while more recently, larger tax refunds provided another boost to consumer spending.

Why retail spending stays resilient

Even with growing economic concerns, consumers continue prioritizing spending on family, holidays and major retail moments like Mother’s Day, Father’s Day and the upcoming back-to-school season. Mathews says that resilience helps explain why retail continues outperforming expectations in many areas of the economy.

"They are going to protect that spending on family," he says. "When it comes to spending on your kids and buying them the things that they need for school, that is an area of spending that has a moat around it."

Understanding the K-shaped economy

While overall spending numbers remain healthy, higher earners are increasingly responsible for driving consumer spending growth, somewhat masking the growing divide between higher-income and lower-income consumers. The top 10% of earners now account for half of all consumer spending in the United States, up significantly from previous decades.

 "When we look at the economy more broadly, we see all these strong numbers," Mathews says. "But we have to recognize that underneath the hood, there's different things that are happening to different segments of the consumer."

How retail continues evolving

Retail remains one of the most misunderstood industries in the economy, Mathews says. Consumers now expect retailers to meet them wherever they are — especially younger generations who increasingly discover and purchase products through social media platforms. The pandemic accelerated that adaptability, forcing retailers to rethink operations almost overnight and respond to shifting customer needs faster than ever before.

Listen to the full episode to hear more about consumer resilience, inflation, AI, changing shopping behaviors and what retailers are watching as the economy heads into the second half of the year.

Episode chapters

(00:00:00) Why consumers keep spending despite economic anxiety

• Why consumer sentiment and spending are no longer aligned

• The surprising factors keeping retail sales strong

(00:05:17) Why family spending stays strong during economic pressure

• How tax refunds helped fuel recent retail sales

• Why back-to-school shopping remains a protected expense

(00:07:03) What a K-shaped economy actually means

• Why higher-income households are driving more consumer spending

• Why retail continues showing resilience across income groups

(00:09:15) How retailers are adapting to a new generation of consumers

• Why today’s shopper expects a seamless buying experience

• How social media is reshaping the customer journey

• What AI could mean for the future of retail discovery

(00:11:11) Why retail remains one of the most misunderstood industries

• How the pandemic permanently changed retail decision-making

• What separates the retailers that survive from those that fail

(00:15:23) What makes a great economist

• How economists piece together signals from across the economy

• Why economics is more dynamic and exciting than people expect

Resources:

• See the latest CNBC/NRF Retail Monitor and dive into retail sales data.

• Become an NRF member and join the world’s largest retail trade association

• Find more episodes at retailgetsreal.com