U.S. consumer spending slowing ahead of earnings

The Reuters U.S. consumers are showing signs of fragility ahead of the peak period for corporate results next month, as some struggling to pay bills and others are slowing purchases of cars, sneakers and household goods, the week's earnings show.

Data released on Friday showed that U.S consumer spending increased more than expected in August, but aggressive interest rate hikes from the Federal Reserve are slowing demand, as it battles stubborn inflation.

Nike, maker of Air Jordan and Converse sneakers, saw its shares drop to the lowest level in 2 - 1 2 years on Friday, a day after the company said it needed bigger discounts to clear a build-up of inventory.

There is evidence that there is a slowdown in spending across a wide swath of the consumer space, with the combination of inflation and rising interest rates pressuring household budgets, said Garrett Nelson, VP and senior equity analyst at CFRA Research.

He said that big-ticket items like furniture and cars that are typically financed have been hit particularly hard.

Rent-A-Center Inc, a retailer that rents televisions, sofas and appliances to lower-income customers, cut its profit forecast for the third quarter on Thursday, citing a weaker economy.

The external economic situation has deteriorated over the past few months, said Mitch Fadel, Chief Executive of Rent-A-Center. He said that this has had an impact on retail traffic and customer payment behavior.

On Thursday, CarMax Inc said that higher interest rates and inflation were starting to take a toll on vehicle demand, a warning that spooked investors in the wider autos sector.

The Chief Executive Officer, William Nash, told analysts that consumers are having to make decisions I just think they are prioritizing their spend a little differently.

Home goods retailer Bed Bath Beyond Inc said on Thursday that net sales fell 28%, as it heavily discounted to rid of its shelves of unsell inventory.

There is a situation right now where a lot of companies are having to deal with inventory issues and inflation is having a significant impact on consumer spending, according to Morningstar analyst David Swartz.

The easing of COVID restrictions is helping to drive spending on travel, a red-hot sector that has been affected by the easing of travel restrictions.

Cruise line operator Carnival Corp saw its shares drop by more than 20% on Friday after reporting third-quarter results that fell well short of analyst estimates.

After a long pandemic-led period, Carnival has ramped up advertising to attract passengers. It has a higher exposure to the mass market category that has been more affected by inflation.

The weak results and warnings that have been seen this week have left investors cautious heading into October when the bulk of companies report results, said CFRA's Nelson.