Bright economic numbers signal a strong holiday shopping season

Robert Spendlove 

This fall’s better-than-expected economic showing is good news for the upcoming holiday shopping season.

Retail sales rose 0.4 percent in September, beating analysts’ expectations. Meanwhile, the economy added a remarkable 254,000 jobs in the month — 100,000 more than most forecasters predicted. The national unemployment rate dropped from 4.2 percent in August to 4.1 percent in September, while wages accelerated 4 percent in September compared to 3.8 percent the previous month.

Bolstered by a strong job market, winter holiday spending is expected to grow between 2.5 percent and 3.5 percent this year, according to the National Retail Federation. That’s in line with historical averages and similar to Deloitte’s 2024 projection of 2.3 percent to 3.3 percent sales growth. Most of the growth will be driven by online purchases, which are expected to jump 7 percent to 9 percent over 2023.

Holiday shoppers’ dollars will stretch further this year than in 2023 and 2022, thanks to slowing inflation and rising wages. The Consumer Price Index slowed to 2.4 percent in September, down from 2.5 percent the previous month. And inflation in the Mountain Region of the U.S. slowed even more, to 1.4 percent in September.

While wage growth has been outpacing inflation since May 2023, household income has yet to fully recover the purchasing power lost to inflation in recent years. Many people are starting off their holiday shopping season already in debt. Credit card debt hit a record $1.14 trillion in the second quarter of 2024, according to the Federal Reserve Bank of New York. And half of credit card holders are carrying a balance from month to month — the highest level in four years, according to Bankrate’s 2024 Credit Card Debt Survey.

Nearly half — 48 percent — of Utahns say they are worse off financially compared to a year ago, according to the Kem C. Gardner Policy Institute’s Survey of Utah Consumer Sentiment. The way people feel about the economy often influences their spending decisions. However, easing inflation and lower interest rates could improve Utahns’ feelings about the economy.

This holiday season may bring price relief in certain categories. Toy prices, for example, dropped 2.9 percent over the past year. Some electronics, including televisions and computers, are also cheaper overall. Motor fuel prices are down 15.5 percent nationally and 18.6 percent regionally. These are all great trends.

Other factors impacting holiday spending include an abbreviated shopping season. With Thanksgiving falling on Nov. 28 this year, there are 26 days from Thanksgiving to Christmas. Additionally, the economic uncertainty surrounding the U.S. presidential election could play a role in how consumers do their holiday shopping.

Robert Spendlove is the senior economist for Zions Bank in Salt Lake City.