Income Gains, Consumer Confidence Drives Better Holiday Spending

Thanks to gains in incomes, increased confidence in the economy and a strong stock market, U.S. consumers are projected to spend more this holiday shopping season.

According to a report in The Wall Street Journal, the increased spending so far this holiday season is coming from both online and physical stores, benefiting the likes of Walmart and Nordstrom. Home furnishing stores and electronics and appliance stores are also seeing strong spending, reported the paper. In November eCommerce, brick and mortar stores and restaurants saw an increase in spending of 0.8 percent compared to October — much more than the 0.3 percent economists were forecasting. It was up 5.8 percent from a year ago and marks the largest yearly increase in November in six years. Department stores and other general merchandise retailers saw a 3.6 percent uptick in sales during November, marking the best November since 2010, reported The Wall Street Journal.

On the Internet, The Wall Street Journal reported online revenue has increased 24 percent since November began compared with a year ago. The report cited Slice Intelligence, a research firm that follows online purchase receipts for the data. Slice noted that online sales at Target, Kohl’s and Costco increased the fastest — while Amazon continues to grow rapidly, but from a bigger sales base. Retailers are also benefiting from inventory management that has improved at physical stores. When Macy’s and Kohl’s reported their most recent quarterly earnings, they both said stores had less inventory to get rid of at a deeply discounted priced.

“It’s an impressive start to the holiday season and probably the best in the last few years,” said Jack Kleinhenz, chief economist at the National Retail Federation, in the report. “When you put the pieces together — job and wage gains, modest inflation, healthy balance sheet and elevated consumer confidence…there’s an improved willingness to spend.” The report noted that the strong spending this holiday season is surpassing gains in income, which may lead to a reduction in spending and an increase in debt levels.