“Analyzing Retail Trends: Do August and September Boost Spending?”

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August and September: Busy Bees or Dog Days?

September, or August in some regions, is often seen as one of the busiest spending months of the year. According to the National Retail Federation (NRF), back-to-school spending is expected to generate an additional $130 billion in sales in 2023, setting a new record. Many states offer sales tax holidays during this period to encourage local spending.

While back-to-school spending is significant, it is often second only to end-of-year holiday spending. To verify this, we reviewed national sales and Experian data to see if there’s a noticeable impact on consumer spending as summer transitions to autumn.

August and September: Busy Bees or Dog Days?

Examining the past decade of retail sales data from the U.S. Census Bureau, August and September don’t appear to be particularly strong months for retailers. The average change from July to August since 2014 has been a modest 1.7% increase, which is lower than the last three months of the year. September shows a clear decline, with spending 6.2% lower than in August.

One reason for the decline in September retail sales is that it has one fewer day than August, reducing shopping opportunities. Additionally, September includes the Labor Day holiday, which, despite being a popular time for sales, isn’t usually one of the busiest shopping days of the year.

Store Card, Credit Card Balances Don’t Show Back-to-School Spending Upticks

Recent credit card balance data from Experian shows that August and September don’t see significant increases in card balances. Credit card balances increased by an average of 0.9% in August, which is moderate. Since 2019, September balances have only increased by an average of 0.1% from August. Typically, consumers spend January, February, and March paying down large balance increases from December, with spending rising or falling modestly for the rest of the year, including back-to-school season.

This five-year window is somewhat limited due to the pandemic’s temporary but drastic impact on consumer behavior.

Average Monthly Percentage Change in Revolving Credit Balances 2008-2023

Looking further back, data on revolving credit tracked by the Federal Reserve aligns with Experian’s data. August spending increases by 0.7% on average, while September shows a modest decline of 0.2% in revolving credit balances since 2008.

Average Credit Card Balances in September 2023 and Beyond

This year, as business media has frequently noted, will be different. This is likely to be true not only for September but also for the upcoming holiday season when credit card spending typically increases. The end of 2023 will be challenging for both consumers and retailers due to several factors:

• Tightened credit: Lenders are becoming more selective about extending credit, implying that consumers will spend less than in previous years.
• Higher interest rates and APRs: Higher annual percentage rates (APRs) have already increased credit card balances more than a year ago. Going forward, higher credit card APRs, currently averaging over 22%, may lead consumers to curb their spending or shift to alternative payment plans like buy now, pay later.
• Student loan payments: Resuming in October, these payments may significantly reduce the discretionary income that student loan borrowers might otherwise use for back-to-school, holiday, and other spending.

If credit card balances increase in September 2023, it will likely be due to accrued interest rather than increased spending.

Overall, back-to-school spending may be somewhat overhyped, despite the popularity of pumpkin spice lattes. In the coming months, seasonality will likely play a secondary role to larger economic forces.

Methodology: The analysis results are based on an Experian-created statistically relevant aggregate sampling of our consumer credit database, which may include the use of the FICO® Score 8 version. Different sampling parameters may generate different findings compared to other similar analyses. Analyzed credit data did not contain personal identification information. Metro areas group counties and cities into specific geographic areas for population censuses and compilations of related statistical data. FICO® is a registered trademark of Fair Isaac Corporation in the U.S. and other countries.

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