How the Economy Will Impact the 2015 Holiday Shopping Season

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How the Economy Will Impact the 2015 Holiday Shopping Season

By Special Guest
Danielle Marceau, Senior economist at Prevedere
  |  December 29, 2015

Will the recent volatility in the stock market and the unpredictable state of the U.S. economy mean a subpar holiday shopping season for retailers this year? Spoiler alert: Most likely not. While the global economy as a whole is on a rocky path, U.S. consumers are emerging as a pillar of stability even while other sectors show signs of softness.

Yes, the growth rate in the U.S. economy is slowing, as it has been through the majority of 2015. While most of the slowdown has been in the energy, commodity, and some industrial sectors of the economy, the retail industry has not been able to escape this trend completely unscathed.

Walmart’s revised expectation indicating relatively flat growth for the current fiscal year sent shockwaves through the industry and has led to much speculation and anxiety regarding the 2015 holiday shopping season. If things aren’t all that rosy for the world’s largest retailer (by revenue), what does that mean to the overall retail industry as we head into peak purchasing season?

Despite this scare, the retail industry is holding up quite well compared to others. Key leading macroeconomic indicators do not suggest that the 2015 holiday shopping season will be overtly negative. However, these leading economic trends show that the season may not be as strong as many had been expecting, and we may begin to see more retailers announcing downward revisions to their outlooks as the industry cools further.

For example, Real Retail and Food Services Sales (adjusted for inflation) during the three months ending in August were 2 percent ahead of the same three-month period in 2014. That’s much slower than the 3.3 percent pace at which we entered into 2015. Expect the final quarter of the year to mark a similar year-over-year increase around 2 percent – nothing robust, and likely slower than many had anticipated or hoped at the beginning of the year, but nonetheless still an improvement over last year.

Multiple leading economic indicators provided the foresight necessary to see the industry slowing in 2015, and these same indicators suggest that while growth will not be vigorous, this holiday season will still be better than last year for retailers. Inflation is virtually nonexistent, gas prices are low, earnings are generally rising, and consumer confidence is holding steady, painting a favorable picture for U.S. consumers.

Spending power is up.

Employment in the United States is ever increasing and at a record-high level, with 2.039 million more people employed today than this time last year. Improving employment coupled with an upturn in wage growth sets a nice undertone for a stable U.S. consumer base. In 2014, wage growth was virtually stagnant. On a monthly basis, Real Average Hourly Earnings in 2014 averaged 0.9 percent higher than 2013. However, so far in 2015, earnings are up 1.3 percent versus 2014, on average. There have not been gains in real spending power of this magnitude in years. While the bump may be artificially large due to deflationary trends in key sectors such as energy, apparel, and transportation, the trend is putting more spending power in the hands of shoppers – a positive sign for the shopping season.   

Consumers are more optimistic.

Another key indicator is consumer sentiment. While recent headlines may show consumer sentiment remaining volatile, up one month and down another, the significant trend to focus on is that confidence is still very high compared to where it was at this time last year, up 11.4 percent. Consumers are feeling okay about the state of the U.S. economy, much better than they did heading into the 2014 holiday shopping season. Recent movements in the Personal Savings Rate provide further confirmation that current headlines haven’t unnerved consumers. During the past three months, the Personal Savings Rate averaged 4.6 percent, below where it was this time last year. Higher confidence in the economy, jobs, and income suggests consumers are not as nervous about the future as they were last year and are saving a lower percentage of their increased earnings. That means shoppers are spending more.

Holidays will be a bright spot in a volatile economy.

The improvement in consumer confidence, lower savings rate, and increasing employment, along with gains in real average hourly earnings, will help keep Americans shopping during the coming months. Expect consumers to open up their wallets and spend this holiday season, which will help support an otherwise wobbly U.S. economy as we head into the New Year.

Danielle Marceau is a senior economist at Prevedere (

Edited by Kyle Piscioniere
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