Here are a few of the bright spots we’re learning about from the holiday shopping season.
Holiday spending is expected to match 2021 levels with people spending an average of $1,445 per consumer. Even the lower-income group is returning to pre-pandemic spending levels as more feel comfortable with the buy-now-pay-later offers. Since inflation is over 7%, consumer spending is altering from the number of gifts to experiential purchases like travel.
Consumers have been purchasing fewer gifts – going from an average of 16 in 2021 to 9 in 2022, but they are spending more on shared experiences like concerts or travel. While that’s good for airlines, consumers have been cutting back on stays outside of the home such as hotels or home rentals. Gift card purchases are also on the rise, with an estimated increase of 7% year-over-year.
Those feeling the inflation pinch are looking to buy sustainable gifts or buying resale items as a way to offset rising prices.
With supply chain woe memories from last year and an uncertain future, shoppers and retailers have moved up the start of sales, and consumers have been on top of the deals. Black Friday, Small Business Saturday, and Cyber Monday (expected) participation is higher than last year.
The pandemic taught many to be completely comfortable buying items online, and while the return to brick-and-mortar stores is expected to increase by single digits this year, online retailers are clearly the winners with nearly double the sales of in-store purchases.
The growing trend from Gen Z is to use social media to help guide their purchases. This can be done either by watching an unboxing video, a retailer’s social networking pages, or by reading reviews from others. Influencers are gaining ground over traditional advertising.
And here are some of the dark corners of the holiday spending season.
Use of Credit
Buy now and pay later is back with over 48% of surveyed respondents saying they have been using credit cards and over 37% saying they are using some other form of extended payments. Revenue from various forms of buy now and pay later are up 81% during the week of Nov. 19th to Nov. 25th. While it’s a positive sign for retailers, it’s a red flag in the long term, especially if a global recession leads to layoffs next year. Higher interest rates have been leading to higher credit card balances and with more people using extended pay systems, it shows how challenged the consumer is and there’s a growing concern for credit defaults in the future.
Part of the high sales numbers coming in from holiday shopping can be attributed to the increased cost of goods. Inventory levels remain elevated. While mass retailers should be able to handle the excess inventory better than others, it’s a sign that consumers are spending the same amount but acquiring fewer goods.
Curbside and Shopping Lines
Curbside pickup has decreased from last year. Some of that is due to retailers suspending the service, but retailers are also spending less on customer service and more on mobile and online commerce infrastructure. Mobile commerce accounted for 55% of online retail sales on Thanksgiving day, showing just how important a mobile commerce presence is to any retailer.
Ok, let’s do a quick review of the reports you need to know about for the week. I think the biggest day to look out for is Thursday. A lower reading on the PCE could push the Fed to lower their future rate hikes from 75 basis points to 50 basis points. The Fed already mentioned being open to lowering the rate hikes.
Tuesday – Consumer Confidence – 10 AM EST – The market is expected to see a drop from 102.5 to 100.
Wednesday – GDP – 8:30 AM EST – The second estimate of the third-quarter GDP is expected to move up slightly from the previous estimate. The consensus is 2.7%, up from the prior estimate of 2.6%.
Wednesday – International Trade In Goods – 8:30 AM EST – The U.S. goods deficit is expected to decrease slightly and come in at -$90.6 billion, which is better than the -$91.9 billion in September.
Thursday – Jobless Claims – 8:30 AM EST – Despite stories coming from the tech world, jobless claims are expected to come in around 235k, down from last week’s 240k.
Thursday – Personal Income and Outlays – 8:30 AM EST – The Personal Consumption Expenditures (PCE) is set to rise from 0.6% to 0.8% month-over-month. However, the core PCE – the number the FED likes to use to gauge inflation, is expected to fall from 5.1% to 5.0%.
Friday – Employment Situation – 8:30 AM EST – The consensus is for the unemployment rate to stay at 3.7%. The participation rate is supposed to tick up from 62.2% to 62.3%.
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