Inflation-battered shoppers cut back on their holiday spending this year — opening their wallets mainly for “big deals,” according to industry experts and newly released figures.
US retail sales rose just 3.1% year-over-year between Nov. 1 and Dec. 24 — well short of analyst forecasts of 3.7% and less than half of the 7.6% spike recorded last year, according to Mastercard.
Amazon and Walmart ramped up promotions through November to entice bargain-hunting shoppers, but analysts said the discounts were not as deep as the prior year when retailers were saddled with excess stock after the pandemic.
Arun Sundaram, an analyst at CRFA Research, said many shoppers waited for Black Friday and Cyber Monday to make holiday purchases and finished the final sprint during Super Saturday — the last shopping day before Christmas.
“Consumers are still spending, but they’re still price conscious and want to stretch their budgets,” Sundaram said.
He said the weeks between Cyber Monday and Super Saturday were a “soft period” for spending, but shoppers used the final weekend before Christmas to look for “big deals.”
Online shopping accounted for a large chunk of this year’s holiday spending. According to the Mastercard report, online retail sales jumped by 6.3% year-over-year, while in-store sales rose just 2.2%.
Apparel sales jumped 2.4%, while in-person dining at restaurants soared by 7.8%, according to the report.
There were declines in sales of jewelry (2%) and electronics (0.4%).
“Ultimately, it was about getting the most bang for your buck as consumers spent on a variety of goods and services, resurfacing spending trends from before the pandemic,” Mastercard senior adviser Steve Sadove said.
Americans have been saddled with soaring prices in recent years though there have been signs inflation is beginning to cool.
The Fed’s preferred measure of inflation — the Personal Consumption Expenditures price index (PCE) — rose less than expected in November.
According to the Bureau of Economic Analysis, core inflation, which excludes food and energy costs, rose 0.1% compared to October.
That was lower than the 0.2% rise forecast by economists polled by Reuters. The year-over-year increase was 3.2%, lower than October’s 3.4% gain.
The figures signal that the Fed is winning a nearly two-year battle against inflation — and further increase the odds for lower interest rates in the new year.
The Federal Reserve has signaled that it intends to slash interest rates — which are currently between 5.25% and 5.5% — by as much as 75 basis points in 2024.
Projections from all 19 policymakers that showed near unanimity that borrowing costs would fall next year, many of them by a substantial margin following their latest policy meeting earlier this month, when borrowing costs held steady at their 22-year high.
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