Holiday shopping is sweet so far, but the spending spree could be a double-edged sword
Crossing off the Xmas list… one Paw Patrol toy at a time. A record 197M Americans shopped between Thanksgiving and Cyber Monday, up 10% from last year. Spending hit $9.5B as folks splurged on everything from new MacBooks to Dyson Airwraps to “Encanto” dolls.
- Amazon said it sold “hundreds of millions” of items between Thanksgiving and Cyber Monday in its biggest Thanksgiving holiday weekend ever.
- Walmart saw a 5% dip in store traffic, but its online searches for Black Friday discounts nearly 5X’d from last year.
- Overall, holiday spend is forecast to grow between 6% and 8% this year — slower than last year, but still above historical averages.
The consumer’s alive and well… but the clock is ticking. Investors keep a close eye on consumer spending because it makes up two-thirds of US GDP. In October, spending growth accelerated from September as inflation cooled slightly. Americans splurged on new cars, furniture, makeup, and eating out — a sign that discretionary spending’s still hot. But as inflation-adjusted “real wages” dip, shoppers are racking up debt to keep splurging:
- IOUs up: US credit-card balances jumped 15% in Q3, the biggest year-over-year spike in over two decades. Meanwhile…
- Savings down: Americans are stashing cash at the lowest rate since 2005 and dipping into pandemic savings to fund their lifestyles.
Spending is a double-edged sword… It’s typically good for the economy, but it can exacerbate inflation (bad for the economy). Inflation is cooling, yet sustained levels of high spending could spell more trouble ahead. Last month, the US added a whopping 263K jobs while wages spiked. A hot labor market, coupled with high spending, could compel the Fed to keep hiking rates. With economists forecasting a 2023 recession, Americans could enter the next downturn with a lot less cash cushion than they had during the pandemic.