A slate of earnings reports in recent weeks show consumers are tightening their belts and prioritizing essential purchases as interest rates rise and inflation persists. But the Club’s retail holdings — Costco (COST) and Procter & Gamble (PG) chief among them — appear well positioned to manage these shifting consumer behaviors in a worsening economic climate. This corporate earnings season comes as the U.S. Federal Reserve on Wednesday raised its short-term borrowing rate by 75 basis points, to the highest level since Jan. 2008 , making debt more expensive for Americans and cutting into discretionary spending. At the same time, inflation has proved unrelenting, with consumer prices up 8.2% year-on-year in September, according to the U.S. Bureau of Labor Statistics. But even as consumers have become more discerning on spending, demand for consumer staples like food, beverages and household goods has held steady. Companies like P & G and Costco have benefited, with sales rising in the last quarter. Conversely, e-commerce giant Amazon (AMZN) has seen sales growth slow, in part due to consumers scaling back online purchases. Despite the shift in spending habits, U.S. consumers are overall in a relatively solid financial position, with lenders like Club holding Wells Fargo (WFC) demonstrating a strong uptick in credit card spending that translated into revenue growth at the bank in the third quarter. Slower discretionary spending With fears of an imminent recession mounting, consumers are growing conscious about where they spend their hard-earned dollars. S & P 500 companies cited sluggish consumer demand similar to levels not seen since the height of the Covid-19 pandemic, according to Bank of America’s earnings tracker that studies consumer discretionary spending. Holiday spending so far this year has fallen 5% from 2021 levels and is on a “downward trajectory,” a holiday spend tracking analysis from Barclays showed. The research also demonstrated that shoppers have started gift buying earlier this year, with a penchant for more affordable items. Analysts at Barclays said the biggest “downbeat sign” came from Amazon . “We are seeing evidence that the consumer pullback is persisting, if not, worsening,” the analysts wrote in a note last week. However, the slower start to holiday shopping came as a surprise to analysts, especially after Amazon launched a second sales event for Prime subscribers last month. The event was expected to stimulate sales at the start of the holiday season but reportedly fell short of Amazon’s Prime Day in July . “With consumers seemingly not responding to promotional activity…we expect to see a reversion to pre-pandemic like clearance activity which will accelerate as we move into December and January,” the Barclays analysts argued. Amazon’s stock is down around 46% year-to-date, and was trading at around $90 a share Monday. Preference for consumer staples The third quarter showed consumers focused their purchases…
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