'Tis the Season for Consumer Spending
December 9, 2019
By Krista Eberly, CFP®
Securities Analyst II
What a wonderful time of the year! It is the holiday shopping season and U.S. consumers are in the mood to spend. It is a short season this year, due to a late Thanksgiving, however retailers started offering discounts well before Black Friday so consumers could take full advantage of the deals available. So far they have (myself included), and the holiday shopping season is off to a great start!
Holiday shoppers break online records in 2019
This year’s shopping season highlights the changing consumer landscape. Traffic into traditional brick and mortar retail stores is down from last year but online sales are strong. The chart below from Adobe Analytics and the WSJ Daily Shot® illustrates this strong online presence. Online sales for Cyber Monday hit a new record of $9.4 billion, a 20 percent increase from a year ago. Also, online sales for the entire month of November were higher than in 2018. Not too shabby.
Online Holiday Sales Comparison: 2018-2019
Source: Adobe Analytics & Wall Street Journal Daily Shot®
Now that we know consumers are opening their wallets and spending more, what can we tell about their financial situations? Can households afford it? Indeed, they can!
In fact, U.S. households are entering this holiday shopping season in tiptop shape. The chart below from the Alpine Macro and the WSJ Daily Shot® shows the savings rate and debt-to-disposable income ratio for U.S. households.
Source: Alpine Macro & Wall Street Journal Daily Shot®
Since the financial crisis in 2007-2008, households have been working to improve their financial situations. They are saving more and reducing debt. This puts consumers in good shape to continue to spend this holiday season.
How will record holiday shopping affect the economy?
Why does the U.S. consumer matter? Consumer spending is an integral part of the U.S. economy, as it comprises over two-thirds of our gross domestic product (GDP). For the past two quarters, consumer spending has been the key growth driver for the U.S. economy. Therefore, if the consumer is in a good position, this bodes well for economic growth going forward.
The strong jobs report on Friday exhibits further evidence that the U.S. economy remains on positive footing. The U.S. economy added 266,000 jobs in November, a blowout month compared to expectations. Also, the unemployment rate fell back to a 50-year low of 3.5 percent and wages rose 3.1 percent from a year earlier. All of this — plus a strong consumer backdrop — bodes well for the U.S. economy heading into 2020.
Between all of your holiday shopping, talk to an advisor this season to discuss how you can leverage the healthy U.S. economy as part of your own investment strategy.