The economy is growing fast. The stock market is booming. Interest rates have plunged. The unemployment rate remains very low and few workers are being laid off. Consumers have not entered a holiday season with inflation running this low since before Joe Biden was president.
No wonder a record number of Americans say they plan to shop this weekend and sales are expected to grow at a healthy rate.
Economists are forecasting that registers will be ringing up sales at a fast pace this year. The National Retail Federation expects sales in November and December to grow between 3.7 percent and 4.2 percent compared with last year.
The NRF forecasts that shoppers will collectively spend between $1.01 trillion and $1.02 trillion in the final two months of the year. If that proves right, it will be the first time spending exceeded one trillion dollars over the holiday shopping season.
“American consumers may be cautious in sentiment, yet remain fundamentally strong and continue to drive U.S. economic activity,” NRF President and CEO Matthew Shay said
The latest inflation data—which is a bit stale because of delays resulting from the government shutdown—shows that core prices in September were up three percent compared with a year ago. That is the lowest level of inflation going into a holiday shopping season since 2020.
That will mean far less sticker shock when consumers hit stores or click on to digital shopping sites. This may be one reason consumers say they expected to spend slightly less this year than last year. Americans plan to spend $890.49 per person on average this year on holiday gifts, food and decorations, according to the National Retail Federation’s annual consumer survey conducted by Prosper Insights & Analytics. This is 1.3 percent less than last year’s record of $901.99 but still the second-highest in the survey’s 23-year history.
A record 186.9 million people are planning to shop from Thanksgiving Day through Cyber Monday this year, up from 183.4 million last year. The top items consumers plan to give to friends and family are clothing and accessories (50 percent), gift cards (43 percent), and toys (32 percent).
While consumer confidence fell in November to the lowest level in months, according to the Conference Board, Americans are not behaving as if they were nervous about the economy. Instead, they seem to be responding to still-positive economic data. The unemployment rate is 4.4 percent, very low by historic standards, and jobless claims have remained consistent with a healthy economy.
Interest rates have fallen steeply this year, with the 10-year Treasury’s yield declining from 4.80 percent at the start of the year to less than four percent. The average rate on a thirty-year fixed mortgage was 6.23 percent going into Thanksgiving week, the lowest mortgage rate to start the holiday season since 2021. Meanwhile, stocks have boomed, with the S&P 500 up nearly 17 percent year-to-date.
Consumers do have some reason to worry about the future, particularly as the Federal Reserve continues to keep monetary policy restrictive despite a slowdown in hiring and a struggling housing market. Surveys show that consumers have more worries about the future than complaints about the current economy.
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