Some Economics Thoughts Going Into Holiday

It’s that time of year again where we stuff ourselves at the Thanksgiving table and then stuff our cars in the wee hours following with early AM deals.  Consumers normally turn out in droves for Holiday deals and if the economy is any indicator I believe this year could be a boom or a bust depending on which lens you view the holidays through.  Let’s take a quick peek at what we are seeing economically.

Consumer spending/consumption is down in Q3 vs. LY while unemployment Jan YOY down but still high at around 9%.  So even with some better employment numbers consumers appear conservative at first glance as more are working but consumption is down.

When looking at what consumers are spending on you can see durables are down Q3 YOY going into the Holliday season where durables can spike when you think of gifts like big screen TVs or new stoves in time for holiday feasts or items to touch up the home in time for visitors. 

The question is where consumers are spending before Black Friday, and it appears it is not on apparel.   As the spending in this area appears to be down dramatically.  This in some respects could be the reason why some retailers like Target or even Wal-Mart may have a renewed focus on the consumable business.  If apparel isn’t driving the transactions and footsteps into the store then food may be the ticket to create frequency into the store.  Everyone's “gotta eat”.  See the apparel consumption trends YOY to the right.

As we step back and look at the disposable income (left) being way down YOY as of Q3. It could lead us to predict the lines might not be as long this shopping season. 

So disposable income is down.  Are the consumers just hording their dollars in savings ready to unleash on Black Friday or before Christmas?  Looking at the chart to the right, the answer would be no as year over year savings is down too.

I am not a Swami and don’t have a crystal ball (at least one that works) but one theory is money is tight and getting the most out of your disposable income means Black Friday shopping is a must this holiday.  It looks as if stretching the dollar is not only desirable, it’s necessary.  The question is, even if the will to shop big on Black Friday/Holiday is there, will the bank account and disposable income be available to take full advantage of the shopping time period?  If not, does the return to over extending on credit make a come back?  To be determined.

HAPPY HOLIDAYS

Data from U.S. Department of Commerce Bureau of Economic Analyisis