So far consumers are defying GOP gloom-and-doom about the economy. Holiday shoppers are buying like crazy
It’s cyber-Monday today, so maybe I’m a little early on my call for the holiday shopping season, but based on what’s been going on since last week’s “Black Friday” shopping frenzy kicked off this year’s holiday shopping season, you’d have to say that consumers aren’t worried about any of the economic headwinds that GOP politicos and their economic pundits have been fretting about.
In its first look at the numbers for this year, Fox Business Channel headlined “Black Friday, holiday shopping season off to a strong start.” Fox Business went on to quote National Retail Federation Chief Executive Officer Matt Shay, who said, “US retailers will have a ‘jolly and happy’ holiday season.”
In its earlier posting on the outlook for this year’s holiday season, NRF headlined, “2023 Holiday to Reach Record Spending Levels.” Said CEO Shay, “It is not surprising to see holiday sales growth returning to pre-pandemic levels. Overall household finances remain in good shape and will continue to support the consumer’s ability to spend.”
Considering the rather bleak assessment of the economy that pollsters have been getting from Americans, this is a striking anomaly between sentiment and behavior.
Any number of polls come to conclusions similar to a Suffolk University/USA Today poll that came out last September. None of the results look all that positive for the economy in general or President Joe Biden’s chances for re-election next year. In that poll, 70% of Americans said the economy is getting worse, not better. More relevant to holiday shopping, 44% said they were going to cut back on holiday spending this year. Most concerning to Biden, by a 47% to 36% margin, respondents favored Donald Trump over Biden when it came to who they thought could improve the economy.
Given that gloomy outlook, you’d think retailers would be expecting a soft shopping season this year, but, as we’ve seen so far, the numbers are saying otherwise.
Surprising? Not really. At least it comes as no surprise to market pros who are used to dealing with differences between sentiment and behavior indicators. When I was making markets (1978-1990) at the Chicago Board Options Exchange, my competitors and I on the trading floor typically shrugged off sentiment numbers when they were reported. They were considered pretty much irrelevant as reads for the state or direction of the economy.
It was behavior numbers that mattered, and one of the most reliable set of numbers were those that produced hard evidence of where and how much consumers were actually spending.
If, for example, nearly half of consumers actually followed through on their plans for cutting back their holiday season shopping plans, as that Suffolk poll reported, I doubt very seriously that the National Retail Federation would be whooping it up over the outlook for this year’s holiday season.
If you’re searching for explanations, the one that probably comes most quickly to mind is that cash-strapped Americans are reaching into their credit cards in order to go on this year’s spending binge. There’s always a concern that over-extended consumers will be forced to cut back on spending somewhere down the road, but that doesn’t seem to be the case this year.
Here are some findings from a Northwestern Mutual Life/Harris Poll study conducted last Spring and published last August: On average, Americans are in substantially less personal debt (debt that does not include mortgages) than they were in 2022. In fact, average personal debt this year is $8,000 lower than it was in 2019.
This is why, as I noted earlier, the NRF says that “overall household finances remain in good shape and will continue to support the consumer’s ability to spend.”
On the political front, this is good news on two levels for Democrats. For one, it shows that people are better economic times by going on a spending spree, a much more valid endorsement for the economy than sentiment poll results. For another, the carryover into 2024 will be a strong one as the consumer spending surge spreads through the entire economy.
Fundamental economic numbers during this era of Bidenomics (promoted above in a public domain photo posted on wikimedia commons) are positive and seem likely to remain favorable next year.
I know Republicans continue to grouse about the inflation hangover that’s been around since the post-Covid economy struggled to right itself, but the way Americans are spending money right now, inflation worries don’t seem to have dampened consumer enthusiasm.
In fact, diminishing concerns about inflation aren’t just perception — they’re reality.
“Real” wages are beginning to go up (meaning that wage increases are outpacing price increases) and look like they'll continue trending that way through 2024.
As we head toward next year’s election, the GOP’s economic argument against the Biden administration will be tougher and tougher for Republicans to sustain.
John Tsitrian is a businessman and writer from the Black Hills. He was a weekly columnist for the Rapid City Journal for 20 years. His articles and commentary have also appeared in The Los Angeles Times, The Denver Post and The Omaha World-Herald. Tsitrian served in the Marines for three years (1966-69), including a 13-month tour of duty as a radioman in Vietnam.
