U.S. consumers show no signs of slowing their spending as the end-of-year holidays approach. Reports of Black Friday sales have been very positive, building upon the strength shown in recent economic reports on overall consumer spending.
MarketWatch reported the following last week:
“The numbers: Consumer spending rose at a healthy pace in October and fueled a U.S. economic expansion that shows no sign of slowing in the waning months of 2024.
“Household spending rose 0.4% last month, the government said, matching the Wall Street forecast. And outlays in September were a lot stronger than initially reported.
“Incomes also rose 0.6% in October, double the increase in the prior month.
“Key details: Consumers spending surged in the third quarter by the most in a year and a half, but there’s little sign they are tapped out as the holiday shopping season gets underway.
“Upper-middle families have been buoyed by rising home values and a record stock market while middle-class Americans have enjoyed stable job security in an era of low unemployment.
“Shoppers have become more price sensitive, however, and retail executives and economists say they have become more resistant to price increases. That’s why many stores are offering big Black Friday sales.
“The savings rate, meanwhile, rose to 4.4% from 4.1%. Although it’s a bit lower than average, households appear to have enough savings to keep spending at current levels.”
FIGURE 1: U.S. RETAIL SALES—ONE-YEAR TREND (% CHANGE)
Sources: Trading Economics, U.S. Census Bureau
Yardeni Research provided further detail on the October report on personal income and outlays:
“Real disposable personal income rose 0.4% m/m during October. The 0.1% increase in real personal consumption expenditures in October reflected an increase of less than 0.1% in spending on goods and an increase of 0.2% in spending on services [Figure 2]. That was enough to boost GDPNow’s Q4 estimate for real consumption from 2.8% to 3.0%.
“Within goods, the largest contributor to the increase was recreational goods and vehicles. Within services, the largest contributor to the increase was health care (both hospitals and outpatient services), followed by food services and accommodation. This pattern is consistent with our view that retired Baby Boomers are spending more on restaurants, travel, and health care.”
Related Article: Real GDP increased at a 2.8% annual rate in Q3
FIGURE 2: U.S. REAL CONSUMER SPENDING BY CATEGORY
Constant prices, monthly % change, Oct. 2024
Source: : LSEG Datastream, Yardeni Research
Total holiday consumer spending expected to set a record
The National Retail Federation is bullish on holiday consumer spending, anticipating a record high for expenditures per person:
“Consumer spending on the winter holidays is expected to reach a record $902 per person on average across gifts, food, decorations and other seasonal items, according to the National Retail Federation’s latest consumer survey conducted by Prosper Insights & Analytics. The amount is about $25 per person more than last year’s figure and $16 higher than the previous record set in 2019.
“‘The winter holidays are a treasured time for Americans, and they are prioritizing spending on family this holiday season,’ NRF Vice President of Industry and Consumer Insights Katherine Cullen said. ‘Despite the shorter window of time between Thanksgiving and Christmas, retailers are prepared to meet the needs of consumers by providing holiday shoppers with earlier deals and sales and by ensuring inventory is available for the most in-demand items this year.’”
Early data for Black Friday spending and projections for Cyber Monday sales supports the expectation for overall higher spending this holiday season.
NPR reported the following on Dec. 1:
“Many shoppers on Black Friday ditched the mall crowds the day after Thanksgiving and spent more money online than ever before. And big retailers relied on deep discounts to draw in sizeable traffic.
“Shoppers spent a record $10.8 billion online on Friday, over 10% more than they did last Black Friday, according to data from Adobe Analytics, which tracks retail transactions. That’s more than double what consumers spent in 2017. …
“‘Crossing the $10 billion mark is a big e-commerce milestone for Black Friday, for a day that in the past was more anchored towards in-store shopping,’ Vivek Pandya, a lead analyst with Adobe Digital Insights, said in a statement. …
“The shopping frenzy should reach its peak on Monday—retail analysts expect Cyber Monday to remain the biggest shopping day of the season and year, with Adobe forecasting a record $13.2 billion in spending that day, up 6% from the previous year.”
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