Jacob Benoit and his son Cameron, 11, try on funny hats at The Hat Shop in Leavenworth on April 10. They were visiting the area from Kaplan, Louisiana. The Hat Shop owner Kevin Rieke says business surged after the pandemic, but recently has noticed customers are spending less with fears of inflation and a possible recession in the future.
Jacob Benoit and his son Cameron, 11, try on funny hats at The Hat Shop in Leavenworth on April 10. They were visiting the area from Kaplan, Louisiana. The Hat Shop owner Kevin Rieke says business surged after the pandemic, but recently has noticed customers are spending less with fears of inflation and a possible recession in the future.
CHELAN COUNTY — Consumer spending typically fluctuates over the course of a year – without the added layer of economic impacts limiting household cash flow and global pandemics barricading shoppers at home, stuck in the hamster wheel of online shopping. Wenatchee Valley Business World zeroed in on local retailers to identify if fears of recession, feeling the weight of inflation and the aftermath of COVID-19 have compounded the normal swings in consumer spending trends – and it was a mixed bag.
“Leavenworth saw a huge bump in sales and visitors the year after Covid restrictions were lowered. There was a lot of pent up desire to 'get out' and be 'normal' again,” said Kevin Rieke, owner of The Hat Shop in Leavenworth. “Probably the stimulus money folks received also helped with disposable income to spend on vacations like coming to Leavenworth.”
Consumer trends, regardless of the economy, annually point to a surge in shopper foot traffic into retail stores during the holidays, primarily December. It’s a familiar visual – lines of sweater-clad consumers jutting out from a counter that’s buzzing with receipt machines whirring and the constant flash of colored gift wrap flying around. Out of the top ten busiest days in Leavenworth for the entire year of 2022, five were in December, said a Leavenworth Chamber of Commerce report. Meanwhile in Wenatchee, now that the spring season has sprung, the downtown Wenatchee corridor has also had a “distinct increase” in visitors and residents to “enjoy the longer daylight hours,” according to Wenatchee Valley Chamber of Commerce's executive director, Steve Wilkinson. Warm temperatures and sunshine can sway fair-weather shoppers into spending more in both Wenatchee and Chelan.
"Definitely starting in May it (business) picks up and usually drops off in September," said Kimberly McCallum, owner of Willow, a lifestyle boutique in Chelan. "Although, I’ll say last year in September, even into October, we were really busy, and I have a feeling that was because the weather was so nice, even into October."
On the flipside, local retail business typically lags in the first quarter, months like January, February and March, Rieke said – when the tourism count in North Central Washington is underwhelming and kids are in school.
The bounce back from COVID and push for shopping locally also contributed to consumer spending trends. According to Steve Lerch, Washington State Economic and Revenue Forecast Council chief economist, data from the U.S. Bureau of Economic Analysis for Washington state illustrated a dip in consumer spending in 2020 that came back “quite strongly” when Covid restrictions eased in 2021. Post-Covid, inflation and related supply chain issues became another transition for both consumers and retailers to navigate. (whitehouse.gov).
“Inflation has hit our business like all others. We are seeing the cost of goods increase almost across the board. Some product lines have been very steep. For example, our German imported hats increased last year 25% and the supplier just let me know that the cost will be going up an incredible 72% on top of last year’s price,” Rieke said. “If you want an affordable German hat for Oktoberfest, I suggest you come by The Hat Shop before July. We are unfortunately having to pass along these inflated costs like everyone else.”
The boost in egg prices (bls.gov) and the persistent tech layoffs (wsj.com) are some of the reasons stacking up to cause mutters about inflation and the country being recession bound. A survey by the National Association of Business Economics reported 58% of economists anticipate a recession in 2023. (washingtonexaminer.com). The impact from COVID-19 can ricochet into the local labor market and local employment can be an indicator for a potential lurking recession as well. Wenatchee Metropolitan Statistical Area (MSA) monthly unemployment rates, spanning from October 2022 through February, have increased each month compared to year-over-year data. Central Washington regional economist Don Meseck noted this was “a concerning trend” in relation to a potential recession. However, a potentially looming recession hasn’t kept shoppers hesitant to dip into their bank account for the occasional splurge on retail or food on a national level, Lerch said.
“In terms of a recession, in our most recent forecast (released in March) we have very slightly negative U.S. GDP growth in the second and third quarters of this year; that could be called a slowdown or a very mild recession,” Lerch said. “National data shows that consumer spending on retail trade and food services is above pre-pandemic trends even after adjusting for inflation.”
A consumer spending data for Wenatchee and North Central Washington area wasn’t immediately available. According to Lerch, inflation and consumer spending data for states and some larger metropolitan areas is only available through 2021, as of April 2023.
“We have noticed visitors are being more cautious with spending on retail items,” Rieke said. “When guests come to Leavenworth, they will pay for lodging, food and drink for sure, but retail spending is the first place we see visitors begin to limit when the general economy is slowing, whether this is real or perceived. I think it is just human nature to conserve when there is uneasiness about the future.”
Inflation was felt across the globe in 2022, but global inflation is anticipated to fall in 2023 and then nudge back up slightly in 2024, according to the International Monetary Fund (imf.org). Here at home in the United States, the Consumer Price Index rose in February 2023 and set the annual inflation rate at 6% for the country (bls.gov). Consumer prices for items besides food and energy, which includes retail, rose 5.5% from February 2022 to February 2023 (bls.gov).
“We are looking to carry more affordable products that won’t scare consumers and with the higher priced items, we are doing our best to buy ‘what the people want’ and what is the hot new trend,” Rieke said. “We are cutting back a little on initial product purchases, but when we find a winner, we will quickly try to infuse the shop with the new hotness.”
Rieke added The Hat Shop is actively working to combat market unease by curating its products to best match consumers' current economic temperature.
“Retailers are presently applying similar successful strategies, applied during the pandemic to mitigate the effect of inflation by focusing on exceptional customer service, convenient hours of business and better promotion to draw in local retail customers and attract consumers visiting Wenatchee,” Wilkinson said. “The pandemic required retailers to adapt and adjust to changing consumer behavior. Similarly, inflation affects consumer behavior."
However, a give-or-take 45-minute drive away in Chelan, consumer spending in retail may not be impacted by inflation. According to McCallum, 2023 numbers are on pace with previous years' sales.
“I kinda feel like we’re in a little bit of a bubble over here,” McCallum said.
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