Despite higher inflation over the past few years, consumer spending has been resilient and kept the overall economy continuing to grow. In their Weekly Market Recap, JP Morgan, one of the Portfolio Strategists we utilize for client accounts, discusses how this trend may continue during the holiday season…
This Thanksgiving, as families gather around the table, the festivities provide a welcome reprieve from the political tensions of recent months. With Americans expected to spend nearly a trillion dollars spreading holiday cheer, this spending showcases their resilience in a shifting economic landscape.
While holiday spending is projected by the National Retail Federation to hit a record high, sales growth, as shown by the chart of the week, is expected to fall slightly below the pre-pandemic average of 3.6%. However, this moderation reflects easing inflation rather than weakening demand. In fact, when adjusted for inflation, real sales are set to exceed last year, buoyed by record shopper turnout and an anticipated
rise in per-person spending to around $900. Driving this is real wage growth, which has remained positive for a year and a half. Furthermore, stock market gains and recent Fed rate cuts have lifted consumer confidence. That said, elevated prices, along with the depletion of pandemic era savings cushions, may cap spending growth for some households.
Retailers, for whom the holiday season drives a disproportionate share of annual sales, face a mixed outlook. Deal hunting consumers are turning to discount retailers, boosting revenue and profit forecasts. Conversely, those reliant on discretionary categories like apparel and specialty goods are seeing softer demand as shoppers focus on essentials.
Despite challenges, this season reflects a broader economic trend: slowing but not stalling. As winter sets in, consumer spending is cooling but remains far from frosty—underscoring the resilience of the U.S. economy as we head into 2025.
