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Sandy Journal

Consumer resilience suggests solid holiday shopping season

Nov 09, 2023 02:38PM ● By Robert Spendlove,

The hustle and bustle of the holiday season generates a flurry of economic activity, from hiring to retail spending to demand for travel and services. Holiday sales are also a barometer of how the economy is doing locally and nationally. 

As we head into the winter holidays, here are several factors impacting the holiday shopping outlook:

Utahns are feeling merrier about the economy compared to a year ago. Consumer sentiment rose to 76.3 in September, as measured by the University of Utah’s Kem C. Gardner Institute’s Survey of Utah Consumers. That’s up from 63.9 in September 2022. Consumer confidence has also improved nationally in the comparable University of Michigan Consumer Sentiment Index. Higher confidence often leads to increased spending.

Inflation is slowing but still too high. Despite the gradual slowdown in price growth over the past year, a third of shoppers expect inflation to influence the way they shop during the 2023 holidays, according to Bankrate’s 2023 Holiday Shopping Survey. Annual inflation slowed to 3.7% in September, still above the Federal Reserve’s target rate of 2% inflation.

Wage growth has boosted purchasing power. Wage growth has been outpacing inflation since May. While this will help ease some families’ holiday budgets, household income has yet to fully recover the purchasing power lost to inflation in recent years. Utah’s total personal income, the sum of income earned by all Utahns in the state, grew by 4.5% in the second quarter of 2023, compared to 4.3% nationally, according to the U.S. Bureau of Economic Analysis.

Retail spending may soften. After stronger-than-expected consumer spending over the summer, a recent Federal Reserve report suggests retail spending might be slowing, particularly on non-essential items. “Consumers may have exhausted their savings and are now relying on borrowing to support spending,” according to the Federal Reserve’s latest Beige Book report. However, that doesn’t mean consumers will stop spending. Bain & Company has projected 3% growth in U.S. retail sales during the winter holiday season. Meanwhile, Deloitte’s annual holiday retail forecast predicts sales will increase by as much as 4.6% this holiday season. Most of that growth will come from online sales.

Household budgets are still tight. Nearly 40% of shoppers nationally planned to start this year’s holiday shopping earlier than normal, according to a National Retail Federation survey. This is not necessarily to get their shopping done early, but rather to distribute the financial cost across the entire season. Just over a quarter (27%) of U.S. holiday shoppers have money set aside for this holiday shopping season, according to Bankrate.

Employment is strong. U.S. employers added 336,000 jobs in September, far surpassing expectations, while the unemployment rate remained at a low 3.8%. Utah’s job market continues to show strength, gaining 35,200 jobs in September, with unemployment at a very low 2.6%. Because a higher employment rate correlates with higher spending, the strong job market is good news for local retailers who get a boost from holiday sales. 

Lags in economic data and outside factors influencing consumer behavior make retail sales hard to predict. Uncertainty from global conflicts in the Middle East and Ukraine could impact the holiday retail outlook. But current signs of a resilient consumer point to a solid holiday shopping season. λ