Driven by less purchasing power, US consumer spending for the month of February dropped 5 per cent compared to a year earlier, a report from Salesforce showed.
Yet even as consumers purchased fewer items, a surge in inflation led to US retailers' online revenue growing 6 per cent year-over-year. Global online revenue decreased by 5 per cent in the same time frame.
“Challenges that consumers experienced over the holidays, including inflation and low inventory, haven’t dissipated in the new year,” said Rob Garf, a Salesforce executive
“While digital commerce continues to prevail, it’s clear that inflation is having an impact on overall consumer spending.”
US and global prices rose 11.2 per cent and 4.2 per cent year-over-year, respectively, while continuing supply chain issues have caused inventory to shrink around the world.
This along with labour issues has led retailers to increase prices for goods as materials become more and more expensive.
Inflation added $32 billion to US goods sold online since the start of the Covid-19 pandemic, a separate report from Adobe showed.
The software company, which tracks more than 10 million products, reported that price gains accounted for 31 per cent of overall growth in online sales.
Adobe expects price increases to add an additional $27bn to what Americans will spend online this year.
The Labour Department reported last week that US inflation has soared to a 40-year high of 7.9 per cent, driven by a surge in costs for petrol, food and housing.
In an effort to combat inflation, the Federal Reserve this week is expected to increase interest rates.
Bloomberg contributed to this report