Americans will spend a total of $39 billion on back-to-school purchases

(CNN) — Last year, consumers shelled out big bucks for back-to-school shopping, spending a record $41.5 billion, according to estimates from the National Retail Federation.

That whopping figure, which amounted to more than $890 per household, surpassed the 2021 record high by about 12%. While rising prices certainly played a role, so did optimism fueled by the strong labor market, slowing inflation and a resilient U.S. economy.

This year, consumers have been more restrained. Although higher-than-usual inflation is largely over, consumers have been on the back foot as they feel the cumulative effects of rising prices and endure an economic slowdown that, while expected, is fuelling uncertainty.

Still, there’s enough of a basis for the NRF to expect back-to-school spending in 2024 to be the second-highest on record, at $38.8 billion, or $874.68 per household.

The extent to which this holds true could prove a decisive barometer not only for how people approach their spending, but also for the health of the consumer-driven economy.

“It seems like there’s still a lot of intent to go out and spend,” Mark Mathews, executive director of research at NRF, told CNN.

People have become “very, very price conscious,” he added.

Search for bargains and cheaper supplies

At any other time of the year, items such as stationery, clothing and electronics would fall under the discretionary spending umbrella.

And, broadly speaking, it is discretionary and higher-value spending that has seen some of the biggest declines amid the spending slowdown.

But going back to school is a unique animal.

“Back to school is not a discretionary event; it’s a really essential expense,” Mathews said. “If you’re going to send your kid to college, you have to buy furniture. You have to buy shoes, because kids are still growing.”

While consumers can’t cut back on essential spending, they can do so; NRF surveys have shown that about 41% of respondents say they are looking for deals.

“Consumers are certainly looking for deals,” he said. “Retailers recognize that with price-conscious consumers, advertising is necessary.”

Shifts in inflation trends are likely helping matters. While the pace of price increases has remained higher than normal, it has been service-based categories (specifically housing-related services) that have provided that upward pressure, consumer price index data show.

Better functioning supply chains and consumers’ shift toward spending on services and experiences have contributed to goods categories experiencing disinflation (prices rising but at a slower pace) or even deflation (prices falling).

Retail prices are expected to fall 0.7% this year, after rising 5.9% in 2022 and 0.6% last year, according to an analysis by S&P Global Market Intelligence economists released last week.

Some commonly purchased school supplies are actually cheaper than last year, and a couple are even below 2019 prices, according to monthly retail tracking data from Circana, a market research firm.

Prices for sticky notes are down 22% compared to the same period last year; paper, 20%; and crayons and pencils, 19% and 13%, respectively. Crayons and sticky notes are even down 7% and 12% compared to 2019 (while the other categories are up at least 11%), Circana data shows.

There are still signs of optimism

Data from the Bureau of Labor Statistics show that average hourly and weekly earnings have been above inflation for more than a year, keeping the consumer spending that drives the economy going.

As such, back-to-school spending volumes should remain broadly in line with last year, Duleep Rodrigo, KPMG’s US consumer and retail sector leader, told CNN in an interview.

“What surprised us was that we saw more positive consumer sentiment when it came to fall shopping,” Rodrigo said of the accounting firm’s most recent consumer survey.

In many cases, this represents a shift from the summer survey, where the outlook looked much bleaker, he said, attributing the increase to heightened expectations for interest rate cuts and discounts.

It could also bode well for the all-important Christmas shopping season, he said.

“They are much more optimistic about spending,” he said.

‘I’m working on the deals’

For some families, spending — especially back-to-school spending — certainly looks a lot different than it has in years past.

In Shoreline, Washington, Amanda Webber and her family have been struggling financially for quite some time.

Most of the family’s savings have gone to pay for medical expenses associated with the brain surgery Webber underwent earlier this year. He is recovering well and hopes to return to work soon, but the monthly budget has taken a hit.

The family has been saving by shopping more at Costco, buying in bulk at the butcher, preparing meals well in advance and keeping the air conditioning unplugged to help lighten the electric bill.

Back-to-school spending is no exception to the rule.

“I’m working on deals,” Webber said, noting that she’s finding coupons online, comparing prices more, checking clearance racks and becoming more involved in her neighborhood’s “buy nothing” group.

She and her husband even ripped out pages from the black-and-white composition notebooks they had on hand to repurpose.

As such, the money actually spent has been fairly selective, Webber said, noting that most of it went toward buying her 16-year-old daughter an outfit ready for interviews and performances.

“I think the shoes were the most expensive part,” said Webber, 49.

A lifestyle change in spending habits.

In Gainesville, Florida, Lisa Castruita, 46, and her teenage daughter live by a simple mantra: “Do more with less or make do with what you have.”

“People have to be smart about what they do and the moves they make,” Castruita told CNN. “Previous generations did a lot with very little.”

The pandemic and the personal and economic disruption that followed were transformative for Castruita, who lost her husband in 2021 to Covid.

“Years ago, I was on support and more income, and I didn’t think twice about buying new everything, new laptops, anything but the best,” she said. “When you’re a single mother or a one-income family, you can feel it … all those (price increases) add up. I’m a widow and I feel like I’ve had no choice but to take a smarter, more measured approach.”

Now that her daughter is entering 11th grade, Castruita said she intends not to fall back into the excesses of previous back-to-school seasons.

“One thing I noticed is that we reinvent the wheel and go into debt for no reason,” he said. “I was spending money on things and 50% of those things weren’t being used.”

In addition to being resourceful, looking for deals and shopping at thrift stores, Castruita said her friends and family, whom she affectionately calls her “tribe,” have been an invaluable resource. They’ve shared gently used clothing, a haircut and a backpack for free, or at a discount, or in exchange for services.

That’s why Castruita estimates that this year her back-to-school retail spending is 60% to 70% lower than in the past. And cutting back on unnecessary spending allows her to spend money on enjoying life experiences with her daughter, she said.

“Today’s economy doesn’t allow you to do things the way you used to,” he said. “It’s about lifestyle changes. It’s about making smart, informed decisions that improve where you are in life.”