Americans Are Spending Big On Christmas After All

December 13, 2023

U.S. retailers may be in for a Christmas surprise, as, despite fears of a downbeat holiday spending season, Americans have been spending big thus far.

Retail sales, which include spending in-store, online, and at restaurants, unexpectedly rose by a seasonally adjusted 0.3% in November from the month prior, according to the Commerce Department. Economists polled by the Wall Street Journal had been expecting a decline of 0.1%. The report is the latest indication that, despite expressing downbeat economic attitudes in polls, Americans are continuing to spend.

Though retail sales data is not adjusted for inflation, Americans are also getting a boost from falling prices. While overall inflation remains elevated, many retail categories, particularly the ones that eventually end up under the Christmas tree, have seen prices turn lower. The most recent CPI report showed toy prices were down 2.8% from last year, sporting goods were down 1.8%, and prices for computers and smart home appliances were down 4.6%.

Consumers have also gotten a helping hand from falling gasoline prices, which frees up money to be spent elsewhere. When spending at gas stations is excluded, the month’s retail sales jumped by 0.6% for the month.

It is unlikely that real consumer spending will grow quite as swiftly in the fourth quarter as during the third, when it grew at a 3.6% annual rate, but it should be solid. Beyond the end of the year, however, the outlook for the consumer remains unclear. Padnemic-era savings stockpiles are undoubtedly running low, the resumption of student loan payments is likely straining many household budgets, and high interest rates have made buying on credit more expensive. Bank of America reported that total credit card spending from their customers during the first week of December was up 1.2% from a year earlier, which may suggest that more holiday shoppers are resorting to debt.

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