SpendingPulse: U.S. retail sales grew only 3.1% during the 2023 holiday shopping season

With the Christmas holiday over, this year's "holiday shopping season" in the United States has come to an end. And there are signs that many American consumers are becoming more cautious during this holiday season, and some shoppers are waiting until the last minute of major promotions to look for cheaper Christmas goods.

According to Mastercard's SpendingPulse report, which measures offline store and online sales, U.S. retail sales grew only 3.1% between November 1 and December 24 of this year. This growth figure is lower than the 3.7% predicted by Mastercard in September and significantly lower than last year's 7.6% growth, indicating that rising interest rates and inflation are putting pressure on consumer spending.

SpendingPulse's estimate measures offline and online retail sales for all forms of payment, excluding auto and travel purchases, and is not adjusted for inflation. Retailers generate the majority of their holiday sales during this period.

“Consumers are spending in a cautious manner this holiday shopping season,” said Michelle Meyer, chief economist at Mastercard Economics. “(However) the economic backdrop remains favorable, with healthy job creation and easing inflationary pressures, enabling consumers to seek out the goods and experiences they value most.”

A feature of this holiday shopping season is that after a relatively busy Thanksgiving and Black Friday weekend, many consumers waited until the last minute before Christmas to shop again, hoping that prices would drop further, and this year there happened to be a full weekend before Christmas.

Some analysts estimated that last Saturday (December 23) was the biggest sales day of the year, surpassing Black Friday.

“If they’re not particularly concerned about supply or afraid of missing out, there’s no reason for them (consumers) to buy early,” said Marshal Cohen, chief retail industry consultant at Circana.

According to SpendingPulse, online retail sales increased 6.3% year-on-year between November 1 and December 24 this year, while offline store sales increased 2.2%. During this period, sales of electronic products and jewelry declined year-on-year. The strongest growth was in the restaurant industry, as people ate out, driving up prices for meals.

Even with the Federal Reserve pushing interest rates to their highest level in more than two decades, strong consumption, especially on travel and restaurants, has energized the U.S. economy in 2023. However, after many households splurged during the pandemic, spending has slowed in some categories, especially appliances and electronics.

Unable to hide hidden worries

Many U.S. retailers gave mixed results on the state of their business during the critical holiday shopping season, with some seeing sales remain steady while others warned that people were pulling back on spending.

While the U.S. job market remains strong, many consumers have significantly less savings than during the pandemic and are facing a sharp rise in credit card borrowing costs. Millions of American students have also resumed monthly payments on their student loans.

Investors were already able to draw some cautious signals from Nike and FedEx when they released their latest quarterly earnings reports a few days before Christmas. Both companies lowered their revenue forecasts, disappointing investors and causing their stock prices to plummet.

Nike Chief Financial Officer Matt Friend said Thursday that demand for its sneakers and apparel was weak outside of promotional events such as Black Friday, and he also noted that traffic on the company’s e-commerce platforms was down while competitors were offering bigger promotions.

FedEx CEO Raj Subramaniam pointed out that "the mix of consumer spending on goods and services is close to pre-epidemic levels. The destocking phase is over, but the restocking phase has not really begun."

Many retailers have started offering Black Friday discounts well in advance of the shopping season to avoid being stuck with excess inventory. Amazon held its Prime Day promotion in October, and major chains such as Walmart and Target have also launched Black Friday deals weeks in advance.

Unit sales of groceries fell 6% through Dec. 16 compared with the same period last year, according to Circana. Some categories remain holiday staples: The best-selling products for children included toy building sets and stuffed animals. For adults, the top sellers were beauty products and on-the-go beverages.

It’s worth mentioning that this year there are a total of 31 days from Black Friday to Christmas Eve, which is one of the longest holiday shopping seasons.

Craig Johnson, president of research firm Customer Growth Partners, said some people may think this is good for business because it expands the sales window. But from another perspective, it will cause a quiet period in December during the non-holiday period. The longer the sales season, the longer the quiet period.

The week after Christmas has become increasingly important for U.S. retailers, as consumers tend to return items or seek higher discounts in stores. Some chains begin advertising post-Christmas sales long before Christmas Eve. Macy's mailed a promotional flyer a week before Christmas, advertising 20%-60% discounts on clothing, accessories and home furnishings for online purchases on December 25 and in-store purchases from December 26 to January 2.

The National Retail Federation had forecast holiday sales would rise 6% to 8% to between $942.6 billion and $960.4 billion from Nov. 1 to Dec. 31. Those figures exclude spending at auto dealerships, gas stations and restaurants. The industry group is expected to provide an updated sales tally for the current shopping season in January.

From Cailianshe