Over the Thanksgiving weekend, consumers showed they are not yet ready to pull back on the robust spending that has driven economic activity over the last three years. Consumers equipped with $1.8 trillion of excess savings, compared with the first quarter in 2020 (approximately 80% held by the upper two quintiles of earners), continued to spend through November.
Retailers’ discounting strategies to offload bloated inventory levels appear to be the spark that drove consumer spending. Across most product categories, consumers benefited from discount rates higher than previous Thanksgiving weekend shopping.
The period from Black Friday through Cyber Monday is traditionally the peak holiday spending for consumers, but this year actual consumption exceeded many analysts’ expectations. Information released by Adobe Analytics indicated e-commerce sales on Black Friday and Cyber Monday increased by 2.3% and 5.8% compared with the same days last year.
While these estimates are nominally based, and inflation is a factor in the growth, higher volumes were most likely the key driver in the strong performance, buoyed by higher-than-usual product discounts. Sales over the holiday weekend at least delayed concerns that the 1.3% growth in retail sales in October was the last high point of consumer spending.
Shoppers are back in the stores
While online sales appear to be the primary driver of consumer spending, it was not the only factor, as in-store shopping also experienced year-over-year growth, based on information released by Redbook Research Inc.
Sales for the week ended Nov. 25, (Black Friday), increased by 8.1% from the same period last year, according to Redbook. When these details are broken down by retailer type, discount stores and department stores experienced a 12.9% and 3.2% gain over the same period in the previous year; indicating spending over the holiday was across all income levels.
In-store shopping was driven by a 2.9% increase in retail foot traffic compared with the same period last year, according to data from Sensoramatic.
And traveling, too
Further, service spending continued to draw consumer dollars, evidenced by continued strength in Transportation Security Administration check-ins.
TSA check-ins during November on a 7-day moving average increased by 13.9% compared a year ago. While consumer mobility still lagged the levels of November 2019, those comparisons are affected by corporate travel which has had a broad pullback .
The takeaway
Retailers’ discounts to offload excess inventory was the catalyst in continued strong consumer spending through November. But we question how long this spending will continue as much of the reason was to take advantage of lower prices after a sustained period when consumers were unable to capitalize on product discounts.
