Some consumers make larger purchases such as swimming pools and mattresses

Americans are postponing some of the most expensive, traditionally financed purchases, in light of the impact of high inflation and interest rates.

Business executives this earnings season lamented that customers aren't interested in spending big-ticket money on their bedrooms, backyards and everywhere in between. It comes at a pivotal moment for the national economy: ordinary citizens were facing the double whammy of rising prices and borrowing costs, while economists and policymakers tried to measure the impact.

This is important because it adds to the growing picture of an eventual slowdown in consumer spending, as experts have long predicted. This means the Fed may get the signal it has been waiting for that raising interest rates has had its intended effects of tightening the economy, which could be good news for investors and consumers.

“Consumer purchasing power is limited.” Sleep number CEO Shelley Ibach told analysts late last month. “As a result, consumers continue to scrutinize their spending and make near-term decisions based primarily on need, price and perceived value. They are postponing permanent, higher-priced purchases.”

The mattress industry is in a “historic recession,” and sales are likely to continue to decline after an already difficult couple of years, Ibach said. The Minneapolis-based company lost more per share and reported lower revenue than analysts surveyed by FactSet expected in the first quarter.

Sleep number is not alone. Executives across the consumer arena have been bracing for — and in some cases, seeing — a slowdown over the past few months. Data from Prosper Insights & Analytics, a partner of the National Retail Federation, shows that American adults are increasingly delaying spending in areas like home improvement and electronics compared to before the pandemic.

“Consumers are still spending, but the feeling we have now is that they are becoming a little more cautious,” said Mark Matthews, executive director of research at the NRF. “They're making important choices about how they spend. They're very price sensitive, and certainly, we're back to a situation where consumers are bargain-minded.”

A shopper who was on the fence about whether she felt an expensive purchase was within budget — likely a more widespread sentiment now with hot inflation — would previously have relied on paying over a longer period of time using credit. But these options have lost popularity as interest rates rise.

In addition, there are more delinquent credit card bills, indicating that the era of consumers flush with money from pandemic stimulus is over. US household debt has accumulated more than $70 billion after the surplus peaked above $2 trillion in August 2021, according to data analyzed by the Federal Reserve Bank of San Francisco. One research group saw credit card debt rising, while the Federal Reserve Bank of New York reported that Americans collectively owe more than $1 trillion.

Consumers typically face either rising interest rates or inflation, as the Fed typically increases borrowing levels when prices rise faster than it deems healthy for the economy. But at the moment, annual inflation, although well below the peak growth seen earlier in the pandemic, remains well above the central bank's 2% target.

This is despite the fact that the federal funds rate has been between 5.25% and 5.50% for approximately 10 months. For comparison, this rate had a paltry midpoint of just 0.13% for more than a year during the pandemic in an attempt to stimulate economic growth.

The standard interest level can directly trigger variable rates on credit cards. Given that, Sleep Number's Ibach said credit card defaults were one reason for consumer fatigue. Increases from the Fed could also indirectly influence loan providers to raise interest rates on new borrowing agreements for things like cars or homes.

Leggett and Platt, which makes components such as springs for beds, is seeing the effects of both rates and inflation. Specifically, CEO J. Mitchell Dolloff said consumers are shifting their spending to focus on services and provision of essential resources like food amid price pressures, rather than more expensive and less essential goods. He also cited interest rate increases as another burden on their shoulders.

WayfairThe furniture e-commerce platform popular among cost-conscious shoppers said it was having trouble selling its most expensive items. Management warned that this is a trend happening across the board with home furnishings.

Retail sales data was flat from March to April, although economists polled by Dow Jones expected monthly growth of 0.4%, according to Commerce Department data released Wednesday. Because these data are adjusted seasonally but not for inflation, they can provide another signal that consumers are not keeping up with rising prices.

Economists are quick to note that what looks bad in the short term to consumers can actually have an upside in the long term. Shoppers who feel unable to pull the trigger on larger purchases — especially when combined with trends like being more price conscious — could provide a case for the Fed that it is putting enough pressure on the economy to control inflation and pave the way to start cutting interest rates.

There are some other factors at play, according to Matthews, of the retail industry trade group. He explained that the pandemic had a major impact. Consumers purchased goods that were supposed to last for several years while stuck at home during lockdowns. This may still be relaxing.

With more emphasis on value, shoppers may wait until Memorial Day or other periods when deals mature, Matthews said.

Finally, Matthews said, a lot of these big-ticket items are also connected in some way to people moving out of their homes. This is bad news given the cooling housing market, which has been hobbled by rising mortgage interest rates.

Residential solar company stage He said any anticipated interest rate cuts — even if they are lower than previously expected — would help demand in states except California. (Installers have become more “flexible” about how they finance in California, said CEO Padre Kothandaraman, which is a unique market because of lower credits.)

whirlpool He cited rising interest levels as a negative pressure on both housing affordability and discretionary spending, both factors for consumers considering appliances like refrigerators or washing machines. North American trading volumes were weak during the quarter, and the company continued to rely on promotions to boost demand, according to CEO Mark Bitzer.

This could bode poorly for retailers who sell these items such as… Best buy, which is scheduled to report its earnings later this month. Bank of America analyst Robert Ohms told clients this week to expect lighter appliance sales from the Minnesota-based chain.

High interest rates have also hampered efforts to improve housing for those staying put, according to The Guardian Home Depot. Despite describing the client as “very healthy,” CFO Richard McPhail said these borrowing costs created a holding pattern on projects like kitchen or bathroom remodels that begin in the back half of 2023.

“It's not about not being able to spend,” McPhail told CNBC. “What they are telling us is that they are simply postponing these projects due to high interest rates, and this does not seem to be the right moment to implement them.”

Like many other aspects of the economy, this negative trend can be felt most deeply among those at the lower end of the income spectrum. It is consistent with the view that the American economic recovery from the pandemic has been K-shaped, meaning that the experiences of different classes are diverging like arms on a letter.

Economic uncertainty and borrowing levels have greatly impacted new swimming pool purchases. Paul Company. CEO Peter Arvan told analysts last month. But there is a clear disconnect between income groups: He said lower-income pools “remain a challenge,” while more expensive options have “steady” demand.

Problems among more price-conscious customers are taking their toll on the Louisiana-based company. Sales to Pool Corp's independent retail customers fell 4% in the first quarter of 2024. This builds on the 8% decline seen during the last three months of 2023.

GeneracPower generators in China are generally considered a luxury for the financially wealthy. For this reason, higher interest rates likely have not affected its clients as much – and any impact will likely have already been felt with levels raised for several months, according to CEO Aaron Jagfeld.

“These homeowners are less sensitive to interest rate movements,” Jagfeld told analysts earlier this month. “Whatever impact higher interest rates may have on margins — on the fringes of the market — we believe that has largely been implemented at this point.”

— CNBC's Melissa Repko, Gabrielle Vonroghe, Jeff Cox and Robert Hom contributed to this report.