Some consumers are punting big purchases like pools and mattresses

Americans are kicking the can down the road on some more-costly, traditionally financed purchases as elevated inflation and interest rates bite.

Corporate executives this earnings season have lamented that customers are disinterested in shelling out on big-ticket items for their bedrooms, backyards and everywhere in between. It comes at a pivotal moment for the national economy: as the average Joe has been contending with a double-whammy of high prices and borrowing costs, while economists and policymakers are trying to gauge the impact this has made.

This matters because it adds to a growing picture of consumer spending finally slowing down, as experts long anticipated. That means the Federal Reserve may get the sign it’s been waiting for that interest rate hikes have had their intended effects of tightening the economy, which could be good news for investors and consumers.

“The consumer’s purchasing power is limited,” Sleep Number CEO Shelly Ibach told analysts late last month. “As a result, consumers continue to scrutinize their spending and make near-term decisions based primarily on need, price and perceived value. And they are deferring higher-ticket, durable purchases.”

Ibach said the mattress industry is in a “historic recession,” with sales likely to continue to decline after two already tough years. The Minneapolis-based company lost more per share and recorded lower revenue than analysts polled by FactSet had anticipated in the first quarter.

Sleep Number isn’t alone. Executives across the consumer arena have been preparing for — and, in some cases, seeing — a slowdown over the last several months. Data from Prosper Insights & Analytics, a partner of the National Retail Federation, shows American adults have been increasingly delaying spending in areas like home improvement and electronics compared with before the pandemic.

“Consumers are still spending, but the sense that we get now is that they’re being a little bit more careful,” said Mark Mathews, the NRF’s executive director of research. “They’re making important choices in terms of how they spend. They’re very, very price sensitive, and, definitely, we are back into a situation where consumers are all about the deal.”

Also, more credit card bills are delinquent, showing that the era of consumers being flush with cash from pandemic stimulus has come to an end. U.S. households are cumulatively more than $70 billion in debt after excess peaked above $2 trillion in August 2021, according to data analyzed by the San Francisco Fed. One research group saw credit card debt rising, while the New York Fed reported that Americans collectively owe more than $1 trillion.

Consumers are usually faced with either high interest rates or inflation, as the Fed typically increases borrowing levels when prices are rising faster than it deems healthy for the economy. But at this moment, annualized inflation, though significantly off peak growth seen earlier in the pandemic, is still well above to the central bank’s goal of 2%.

That’s despite the Fed funds rate sitting between 5.25% and 5.50% for about 10 months. For comparison, that rate had a measly midpoint of just 0.13% for more than a year during the pandemic in a bid to stimulate economic growth.

Where the benchmark interest level sits can directly drive variable rates on credit cards. Given that, Sleep Number’s Ibach said credit card delinquencies were one reason for the consumer being stretched. Increases from the Fed can also indirectly influence loan providers to drive up interest rates on new borrowing agreements for things like cars or homes.

Leggett & Platt, which makes components like springs for beds, is seeing the effects of both rates and inflation. Specifically, CEO J. Mitchell Dolloff said consumers are shifting their spending to focus on services and affording baseline resources like food amid price pressures, as opposed to pricier, less essential goods. He also cited increased interest rates as another weight on their shoulders.

Wayfair, the furniture e-commerce platform popular among cost-conscious shoppers, said it was having trouble selling its most expensive items. Management cautioned that it was a trend happening across the board with home furnishers.

Retail sales data was flat from March to April, despite economists polled by Dow Jones anticipating monthly growth of 0.4%, according to Commerce Department data released Wednesday. Because this data is adjusted seasonally but not for inflation, it can provide another signal that consumers aren’t keeping up as prices climb.

Economists are quick to note that what feels bad in the short term for consumers can actually have a silver lining in long run. Shoppers feeling unable to pull the trigger on bigger purchases — especially when paired with trends like being more price conscious — can offer justification for the Fed that it’s put enough pressure on the economy to bring inflation under control and clear the way to start lowering rates.

There’s a few other factors at play, according to Mathews, of the retail industry trade group. The pandemic had a pull-forward effect, he explained. Consumers snapped up goods meant to last several years while they were stuck at home during the shutdowns. This may still be unwinding.

And, with a greater focus on value, shoppers may wait until Memorial Day or other periods ripe with deals, Mathews said.

Finally, a lot of these big-ticket items are also connected in one way or another to people moving homes, Mathews said. That’s bad news given the chilled housing market, which has been stymied by soaring mortgage rates.

Like many other aspects of the economy, this negative trend can be felt most deeply by those at the lower end of the income spectrum. It aligns with the view that the U.S. economic recovery out of the pandemic has been “K”-shaped, meaning the experiences of different classes diverge like arms on the letter.