That jump may help the economy, but it is doing so on the back of an already strained credit situation for the average American. It is also considerably lower than what was forecast.
According to a report released yesterday by Mastercard, U.S. retail sales were up by 3.1% for the period running from November 1 through Christmas Eve this year, as gift-givers and those spending on Thanksgiving and early Christmas celebrations laid out their credit cards on the old-fashioned theory that yes, money might buy happiness.
That number compares to Mastercard’s original prediction that seasonal spending would rise by 3.7% when they made their last forecast in September.
According to the credit card issuer’s just-released “Holiday Season Recap & 2023 Outlook”, after 2021’s 8.5% growth during the same period after a disastrous 2020 infected by the plandemic and government lockdowns, and 2022’s 7.6% surge despite high inflation a year ago, the 3.1% year-over-year spending increase for 2023 represented a substantial drop of 59% compared to 2022’s spending between November 1 and December 24.
As the report notes, people continued to spend heavily on “experiences” in 2023 despite the downturn. Sales in leisure and dining establishments rose by a sizable 15.1% compared to last year. That tallies well with other data provided by the Bureau of Labor Statistics showing this business category was also consistently among the highest ranked with respect to job growth in 2023.
Other “experiences” which people continued to put at the top of their spending priorities in November and December this year were in travel spending, particularly for hotels and airline tickets, along with splurge entertainment purchases such as for concerts or other in-person events. Hotel purchases were up by 36.9% and 41.6% for October and November compared to last year, for example. Airline ticket purchase for the same months were up by 17.2% and 16.2%.
Restaurant sales were up during the November 1 to December 24 period as well this year, by 7.8%.
Attending movies, which had produced lackluster spending much of last year and up through mid-summer 2023, also began to rise dramatically this year despite there being much worth watching at cinemas.
On the opposite end was a major decline in purchases of luxury items at year-end. The jewelry category of purchases, for example, fell by 2% compared to 2022 for this time of the year. Electronics purchases were also down, by 0.4%.
That decline in luxury items buying continued a steady fall this past year, began 2023 with a massive 45.3% year-on-year growth for January, followed by an even higher 55.4% jump in February, followed sharp drops in March, April, May, and June to 27.1%, 26.0%, and 4.0%, respectively. From that point forward every succeeding month has seen a decline in the overall purchase of luxury items compared to a year ago.
Though not a luxury item exactly, the furniture and furnishing category of buying also saw declining purchase trends in 2023. These sorts of purchases are considered buys more for the long-term than short, and the evidence now is that people are putting them off.
Apparel purchases, which are generally more fast fashion focused these days, with impulse buying and gift giving driving the spending, rose by 2.4% for the last two months of the year.
Mastercard’s analysts believe these purchases declined mostly because of inflation. They point out evidence that people are checking out prices at multiple sales outlets more than in the past and waiting for sales promotions to consider making a final purchase decision. The credit card company reported that Walmart and Amazon.com continued to drive short-term demand into early December via more promotional discounts than in past years. Those discounts were eased considerably as time grew short in the last days before Christmas, with “Super Saturday” specials on December 23 featuring less deals than last year at the same time.
Buyers did go online to carry out some of these price comparisons this year, based on what Mastercard determined, but the desire to find the best deal did not end up driving eCommerce sales that much higher, at least compared to last year. In 2022, for example, online sales for the November 1- December 24 period were up by 10.6% compared to 2021. This year the rise was considerably smaller, increasing only by 6.3%.
As to what this all means, the declines in purchasing “big ticket” items in the luxury goods category and even in automobiles in this period, coupled with an overall decreased consumer spending rise of just 3.1% this year versus 7.6% for the holiday period last year, could mean consumers are finally waking up to the need to conserve funds more.
This is happening against the backdrop of an economy which currently does not look like it will fall into a recession, but the slower purchasing growth these last two months is in a way a mirror of other surveys which show that Americans are still nervous about the economy and worry that layoffs might kick in again as 2024 approaches.