There's enough economic underpinnings for a ho-hum shopping surge surrounding the ho-ho-ho season.
It’s a good bet that California’s holiday shopping season won’t be delightful – nor will to be frightful.
Sure, there’s a sleighful of worry as the annual gift-giving rush begins. There are economic gyrations and geopolitical uncertainties – domestic and international. Did I mention no easy and final cure for the worst bout of inflation in four decades?
It’s the kind of anxiety-building pattern that could let Scrooge-like thinking creep into most Californians’ shopping lists.
Curiously, some of that skittishness stems from business strengths. Think of inflation, for example. It’s a by-product of an overperforming economy. Low unemployment has boosted paychecks and employers’ labor expenses, which often are passed on to consumers.
So, times are relatively good for numerous folks in the Golden State. That’s enough economic underpinnings for a ho-hum shopping surge surrounding the ho-ho-ho season.
However, it’s by no means simple to build an upbeat year-end retail outlook. Take a peek at 12 economic variables that are shaping California’s holiday shopping spirits …
These factors set the overall tone for the holiday shopping season.
Sales momentum: California’s shopping cooldown is already underway. Retail sales fell at a 0.1% annual rate in the past year vs. a 5.5% average growth in the past five years. Last year’s holiday season saw sales jump 4.9% after a 12.6% surge in 2021.
Jobs, jobs, jobs: You need a paycheck to be a serious holiday shopper and unemployment has been low. The statewide rate averaged 4.6% this summer vs. a 6% 10-year average. Joblessness was 4.1% during the past year’s holiday season and it was 5.8% in 2021.
Raises: The size of paychecks also matters to retailers – and these aren’t gravy days. California pay rose 3.2% in the past year vs. a 3.5% 10-year average increase when measured by a mix of California wage swings and the employee cost index. Recent pay hikes also look small vs. 4.7% growth in 2022 and 4.4% in 2021.
Inflation: Just about every shopper feels the pain of a surging cost of living. The US inflation rate averaged 3.6% this summer – nearly a point above the 2.7% 10-year average, according to the Consumer Price Index. But it’s better than last holiday season’s 7.1% or 6.8% in 2021.
Bill paying: The rare late payment suggests Californians can afford what they bought. Consumer delinquencies run 1.1% of all debt statewide vs. a 2% 10-year average, according to the New York Fed. Yes, it’s up from last year’s 1% but that was essentially a historic low.
What retailers do with staffing says a great deal about what they think of the chances for big holiday sales.
Workers: Retail employment across California is up 0.4% in the past year past year. That’s on par with 10-year growth – a noteworthy advance considering all the business lost to online competition. The last big holiday hiring spree – a 3.1% jump in 2021 – was more restaffing after pandemic lockdown losses.
Salaries: California’s total retail payrolls grew by 4.7% in the past year vs. a 3.7% 10-year average. Merchants have to compete with other employer’s hefty pay raises to keep stores adequately staffed.
What shoppers think, rather than economic fundamentals, counts, too.
Optimism: Consumer confidence in California is up 2.5% this year – support for a modest shopping spree, according to the Conference Board. It’s better than last holiday season’s 7.7% confidence dip but it pals vs. a 41% jump in 2021.
Real wages: When to mash up pay hikes vs. inflation, it looks depressing. Consumer buying power fell 0.4% in the past year vs. an 0.8% increase on average over 10 years. Some solace may be found when noting 2.4% dips in buying power in the previous two years.
Net worth index: California wealth isn’t simply paychecks. So consider my measurement of stocks and house prices – up 8% in the past year when looking at the Nasdaq stock and FHFA home indexes. Yes, it’s below a 12% 10-year average. It’s also a sharp reversal from last year’s 8% loss.
Consider the national economic backdrop, too.
Online shopping: The bane of every brick-and-mortar merchant continues to grab shopping’s sizzle. US “nonstore” sales grew 8% nationally in the past year – but that’s a slowdown from a 12% average since 2018.
GDP: The total business output of the US is surprisingly robust. Gross domestic product, a broad measure of economic production minus inflation, grew 2.9% in a year compared to a 2.3% average expansion since 2013.
Retailing gurus project meek but noticeable US sales gains this holiday season nationwide.
Yet those meager advancements may feel disappointing following two robust shopping sprees as the economy emerged from its coronavirus cobwebs. Ponder some highlights are various forecasts.
Look, most Americans are ready to shop with 74% of folks surveyed telling pollsters they’ll spend the same or more this holiday season, says Boston Consulting Group. And that’s why it will be a record-breaking holidays as the typical US shopper spends $1,652 on seasonal goodies, say the consultants at Deloitte.
Still, US holiday sales will be up just 3% to 4% vs. 2022, says the National Retail Federation. That growth is below 5.4% in 2022 and 12.7% in 2021 – but on par with a 3.5% average in pre-pandemic 2003-19.
And what’s being bought will change. Shoppers will spend 7% more on holiday gifts but 16% less on non-gift seasonal spending – think food or events – says the Conference Board.
But there’s one constant: online shopping grows. Nonstore buying will grab 19% to 20% of holiday sales vs. 14% in 2019 and 18% to 19% in 2022, says EY Parthenon.
PS: Score your holiday shopping confidence by taking an online quiz at https://bit.ly/holidayforecast!
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
