As the holiday season approaches, American consumers are showing a strong inclination to embrace festive shopping with open wallets. Projections from the latest Mastercard SpendingPulse survey indicate a 3.7% increase in US retail sales, excluding automotive, for the holiday shopping season spanning November 1 to December 24.
This uptick suggests a return to pre-pandemic levels, following last year’s remarkable 7.6% surge and 2019’s 3.4% increase in holiday sales. According to Michelle Meyer, Chief Economist at the Mastercard Economics Institute, this shift mirrors a more normalized inflation environment, despite lingering inflation in certain categories.
However, consumers face challenges including high interest rates, elevated gas prices, and student loan repayments. Gasoline costs reached a 2023 peak at $3.88 per gallon, although lower than 2022’s $4-plus levels, as reported by AAA. Meyer stresses vigilance in monitoring pump prices, as they directly influence consumer spending perception and economic sentiment.
Household debt service and student loan payments also weigh on consumers. Meyer foresees the return of student loans as an economic adjustment, not a sudden upheaval. Higher interest rates have marginally impacted household balance sheets compared to last year’s holiday season, as per the report.
Meyer notes that, despite a higher rate environment, the debt service ratio – a measure of debt payments relative to disposable income – aligns with 2019 levels. She commends consumers for adeptly managing their financial obligations.
E-commerce is poised for a 6.7% surge, while in-store sales are anticipated to rise by 2.9%. Meyer observes a persistent preference for e-commerce, underscoring a lasting pandemic-era trend.
Electronics sales are projected to spike by 6%, driven by a desire to upgrade home office technology investments made in 2020 and 2021. Meyer highlights the availability of new options, appealing to those who stocked up on technology post-pandemic.
Consumers are also expected to splurge at restaurants this holiday season, with an estimated 5.4% growth, surpassing the projected 3.9% rise in grocery sales. Rising food prices prompt Americans to weigh dining in against dining out, as grocery costs rose by 3% YoY in August, while restaurant prices surged by 6.5%.
Experiences hold allure for Americans this holiday, exemplified by the economic surge driven by tours of Taylor Swift and Beyoncé this year. Meyer acknowledges the remarkable willingness of people to invest in such experiences and anticipates a similar trend this holiday season, generating an additional economic push.
Michelle Meyer emphasizes that consumers wield significant economic influence. Their clear preferences regarding spending signify a robust holiday season ahead, marked by a balanced focus on both material indulgence and experiential enjoyment. Consumers’ power of choice remains a driving force shaping this year’s holiday shopping landscape.
Source: Yahoo Finance
