The holiday season is upon us and marks the retailer’s busiest time of the time of year. Consumers are looking for the best presents at the best deals. Black Friday and Cyber Monday mark the official beginning of the holiday season. The shopping season is off to a strong start, but could the U.S consumer confidence suggests challenges retailers may face.
The U.S. consumer confidence slipped at the end of November and this may not be a positive sign for retailers during the holiday season. For the month of November, the U.S consumer index fell to 91.3. These index score is an increase from October’s reading of 90.0, the problem is estimates indicated that the final index for November would be 93.0. With the improving economy, many thought the index would be higher. Even with low gas prices and steady job creation, consumers are still practicing cautious spending habits. Certain factors such as slow wage increases and increasing prices of necessities such as medical care and shelter may attribute to cautious spending.
Consumers may have less discretionary income to spend during this holiday season. “If consumers are not happy and healthy out in the marketplace spending on goods and services, particularly in the key holiday spending season, there is very little hope for sustaining the current status quo, let alone optimism to anticipate additional momentum from the U.S. economy in the near-term,” If the retail industry a rough holiday season, they may be concern for a rough start to the beginning of 2016 .
It is not all doom and gloom for retailers however, as a reason for optimism would be the November Consumer Spending Forecast rose by a little over two points from last month, as well as last year, according to Forbes (below chart):
Additionally, there was a slight wage increase in October, rising 0.6% according to Bloomberg.
One key aspect that everyone is paying attention to, that may have a large impact on the economy is the Fed’s decision to raise interest rates. Federal Reserve Governor Daniel Tarullo had this to say, “The U.S. economy seems still to be chugging along with modestly above-trend growth,” Tarullo said Monday in an interview on Bloomberg Television. “We’ve certainly seen continued improvement in the labor market, but the environment for inflation is still one where there is still a lot of uncertainty.”
Lastly, another contributing factor that might help retailers is low gas prices. According to Bloomberg, “Gasoline costs have been receding for most of the past five months. The average price of a gallon of regular gasoline fell to $2.06 on Nov. 23, the lowest since February, according to auto group AAA. That compares with a daily average of $3.34 per gallon in 2014.”
Yet, with those positives, it appears that people are still waiting for additional clarity and improvement in the economy before a noticeable shopping uptick occurs.
The economic outlook per the reasons above, has some positives and negatives, and it will be interesting to see in the coming weeks the numbers as it relates to consumer confidence and spending this holiday season.
Many retailers had a good start to its holiday season with the Black Friday and Cyber Monday. However, some retailers experienced a sluggish start to the season. Only time will tell if retailers are able to gain momentum throughout the holiday season.
SUSSMAN, A. (2015, November 25). U.S. Consumer Sentiment Slips in November. Retrieved December 7, 2015, from http://www.wsj.com/articles/u-s-consumer-sentiment-slips-1448464097 Greenberg, J. (2015, December 1). Cyber Monday Breaks Record, But It’s Not Really A Thing Anymore. Retrieved December 7, 2015, from http://www.wired.com/2015/12/cyber-monday-breaks-record-but-its-not-really-a-thing-anymore/
Kline, D. (2015, December 2). These Companies Were Black Friday’s Biggest Losers — The Motley Fool. Retrieved December 7, 2015, from http://www.fool.com/investing/general/2015/12/02/these-companies-were-black-fridays-biggest-losers.aspx
Jamrisko, M., & Stilwell, V. (2015, November 25). Consumer Spending Rises Less Than Forecast as Americans Save. Retrieved December 7, 2015, from http://www.bloomberg.com/news/articles/2015-11-25/consumer-spending-rises-less-than-forecast-as-americans-save
Drenik, G. (2015, December 2). Retrieved December 7, 2015, from http://www.forbes.com/sites/forbesinsights/2015/12/02/5-key-consumer-analytics-to-know-for-the-holiday-season/