One might expect shoppers to err on the side of caution this holiday season. However, while some analysts predict exactly that, there are reasons to be hopeful—and they seem to be accumulating.
With higher interest rates, rising prices, and continued violence in the Middle East and Ukraine, one might expect shoppers to err on the side of caution this holiday season. However, while some analysts predict exactly that, there are reasons to be hopeful—and they seem to be accumulating.
The past few years have been rough:
- Spring 2020: Covid-19 reared it’s ugly head (and put masks on ours)
- January 6, 2021: the attack on the Capitol
- February 24, 2022: Russia invaded Ukraine
- October 2023: Hamas attacked Israel (and vice versa)
In the meantime, while Washington took numerous steps to help mitigate the economic impact of COVID, the Federal Reserve pushed back by slamming on the brakes in early 2022. Since then, the bank prime rate has risen from 3.25% to 8.5%. This was, of course, part of their effort to control rising inflation (the futility of which I have discussed elsewhere).
It was for reasons like these that early forecasts of holiday sales were fairly pessimistic. Several days after Black Friday, for example, CNN reported this regarding the US economy:
“This year, dollar sales growth for the holidays in the United States is forecast to slow to 3.3% from 6% last year. That’s below the pre-pandemic average of 3.9% and well below rates seen in recent years, according to an analysis from S&P Global Market Intelligence.”
The story in the UK was similar:
“Despite falls in headline inflation, predictions for Christmas consumer spending in 2023 remain downbeat. Families worry about household bills and the pressure of interest rate rises, while retailers are concerned about the supply of products, running costs and recent slowdowns in spending.”
As was that in Australia:
“Spending in the lead up to Christmas is likely to remain subdued, with consumers more budget conscious than in previous years. The muted outlook for consumption has got some economists and media outlets predicting a possible recession in 2024.”
All of this seemed quite reasonable a just few weeks ago—until the Grinch’s heart grew three sizes.
What has changed in the last several days:
- November’s inflation figures showed a deceleration to an annual equivalent of 1.21%
- In response, the Federal Reserve hinted at interest rate cuts
- Which then spurred a stock market rally
- Online sales were better than expected
- Retail sales rose unexpectedly
- Jobless claims fell to historic lows
All of this is causing pundits to rapidly shift gears and forecast a much stronger holiday season than first expected.
The Ghost of Christmas future
While it’s too early to say that this guarantees a prosperous holiday season, the signs are positive. Of course, as the last few weeks have shown, things can change very quickly. But, Christmas is only a week away. Maybe—just maybe—we can avoid another global catastrophe for the next seven days. There’s plenty of time to continue ignoring climate change in the new year.
This article was written by John T. Harvey from Forbes and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.