Consumer spending this holiday season

Now that Christmas has passed, retailers may see an influx of shoppers as many may begin taking advantage of post-holiday sales or exchange gifts for items that better suit their needs. This year, holiday spending is expected to increase by a solid 3.6% to $655.8 billion, which is significantly higher than the 10-year average of 2.5%. It’s also above the seven-year average of 3.4% since economic began recovering in 2009.

Todd Hauer

Interestingly, while more than 154 million shoppers came out on Black Friday – topping last year’s numbers by 3 million consumers –  those consumers also spent about $10 less on average ($290) compared to the previous year ($300). This has largely been attributed to heavy discounting brought on by a promotional environment among retailers. However with only 9% of consumers claiming they have completed shopping after Black Friday weekend, we expect holiday spending as a whole will either meet or exceed expectations.

In particular, we believe that we’ll see a 1.3% increase over last year’s 0.8% in softline retail spending, which are more personal items that are, often times, literally soft – such as clothing, accessories and footwear. Hardlines, nonpersonal items such as sporting equipment, appliances or electronics, are expected to perform respectably, but slightly weaker at a 2% increase this year compared to 2.5% in 2015.

Expectations this year are more optimistic this year:

• Weather experts are predicting a colder winter this season, which is seen as favorable to sales as consumers prepare for the colder temperatures with clothing and emergency preparedness purchases. However, the colder weather may also pose a risk as it may disrupt store traffic.
• Retail spending was up 2 percent as of Dec. 19, slightly slower the 2.4 percent gain at this time last year, with the rate of online spending far outpacing buying at physical stores from Oct. 29 through Dec. 19, according to First Data. Online sales growth was up 9 percent, while spending at physical stores was up a mere 0.1 percent. At the mid-season point, e-commerce made up about 22 percent of retail spending, up from 16 percent in 2015. Overall, the average dollar amount spent per person for the 45-day period was $70.28, up slightly from last year’s $69.34.

Todd Hauer is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Denver. The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice.  The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, member SIPC.

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Todd Hauer

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