Back-to-school spending set for first drop in nine years due to inflation

Inflation is expected to be the main driver behind the first yearly decline in back-to-school spending in nine years, according to a new report from Deloitte.

Deloitte's 2023 back-to-school survey projects total spending per child will fall 10% to $597, down from $661 in 2022. More than half of the parents who plan to spend less attributed the decline to "reduced disposable income."

"With budgets strained this season, continued high prices could dampen the excitement of the back-to-school season for many families," Nick Handrinos, Deloitte vice chair and US retail, wholesale and distribution, and consumer products leader, said in a release. "Consumers will likely prioritize where they spend money as they look to replenish their savings accounts and spend on experiences, such as summer vacations, over goods."

Read more: How much money should I have in my checking account?

The survey, conducted at the end of May, polled a sample of 1,212 parents of school-age children.

The survey's findings fall in line with retailer sentiment of a cautious consumer who is becoming more selective with spending even as inflation has ticked down over the last year. Wednesday's Consumer Price Index report that showed inflation in June eased from a year ago but still remains higher than the Federal Reserve's 2% target.

Deloitte's report suggests parents will spend less on clothing (down 14%) and technology (down 13%) compared with the year prior, while school supplies spending is expected to jump 20%. This largely reflects what companies selling back-to-school items have said over the last several months.

In May, Target (TGT) flagged a "softness" in discretionary spending as sales increased just 0.6% from the same quarter the year prior. Foot Locker (FL), which refers to back-to-school as a "key selling moment," cut its sales guidance for the full year in May as it feared a consumer slowdown would continue throughout the year.

"Inflation while abating is still high, higher than before," Foot Locker CEO Mary Dillon said during the company's earnings call on May 19. "So the basics in people's household — whether it's gas, food, or rent — are elevated in terms of cost, so that puts pressure on the ability to spend discretionary dollars, which affects our category."

Josh is a reporter for Yahoo Finance.

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance