New economic data for the month of November showed an increase in retail spending among U.S. consumers compared to October, as well as a GlobalData comparison signaling a spending increase of $330 per person compared to November 2020, both good signs that consumers are pushing for a "jolly holiday season."
The increase comes as officials said last week that prices have risen 6.8 percent over the past year, the largest hike in 40 years, for products like food and gas along with cars, homes and clothing.
In addition, the average U.S. family is reported to be making more money now than before the pandemic, as some companies have raised wages a reported 4.2 percent as of September over the past year, the largest increase in about 20 years. Stimulus checks and increased unemployment benefits over the past year also contributed to the boost in optimism for consumer spending.
Retail spending rose about 0.3 percent, a slower rise than the 1.8 percent reported in October, according to the U.S. Commerce Department.
Sales at department stores and other retail dropped slightly, but the largest increase since July was seen in spending at restaurants, with a 1 percent increase in November.
Stephen Stanley, chief economist at Amherst Pierpont, said the trend of the last two months mirrors a typical economic trend, with a balance of larger and smaller changes from month to month.
"The miss relative to expectations, while substantial, is not large enough to be game-changing for the economic big picture," Stanley wrote Wednesday, according to the Associated Press. "It appears that we may (be) getting back to that mode. I still fully expect the Christmas retail season will be robust."
The overall 0.3 percent increase was smaller than many economists predicted, but some said the constant media coverage and discussion of supply chain issues and shortages could have caused some people to start their holiday shopping earlier, splitting the economic benefit of the holiday season between October and November.
Omicron emerged late in November, however, and the report Wednesday would not capture any of its negative effects.
Retail sales, though not as strong as forecast, continue to rise in an economic environment that has hamstrung some retailers. Many have had to sharply increase pay to find and keep workers, increasing their cost of doing business. They are also scrambling to fill shelves with major U.S. ports still backed up.
At the same time, with Americans paying more across the board for necessities like food and gas, the slowdown in spending may be an indication of inflation fatigue.
At Stew Leonard's, a family-run grocery chain based in Connecticut and New York, some families are trading down, buying chicken instead of red meat, or bananas rather than more expensive blueberries. Others seem unfazed, snapping up lobster despite a significant uptick in prices.
At Kido, a small children's boutique in Chicago, spending is elevated despite an uptick of about 5 percent for toys and other items, said owner Keewa Nurullah. She expects a 15 percent increase in sales for the year.
"Those gift-givers are buying more than ever before because they are trying to disguise the pandemic," Nurullah said. "They don't want their kids to be deprived."
The U.S. government provided stimulus checks in March as well as a $300 weekly unemployment supplement from March to September. Most households with children began receiving a monthly child tax credit in July, as well.
That has led to buoyed optimism about consumer spending, which drives a majority of the economic activity in the U.S.
Though big-box retailers are promising stocked shelves for the holiday, supply constraints appear to be stubborn. Target CEO Brian Cornell recently told the Associated Press he believes that it will take several years for supply chain clogs to be cleared.
That is not all bad news. The Minneapolis retailer has added 30,000 new supply chain jobs to meet surging demand and to navigate the changed landscape.
"It's really driven by just incredibly strong demand and a very healthy U.S. consumer," Cornell said.
The National Retail Federation, the nation's largest retail trade group, said this month that the holiday shopping season appears to be on pace to exceed its sales growth forecast of 8.5 percent to 10.5 percent despite additional challenges this year, from a new variant of the coronavirus, to soaring inflation.
The retail report released Wednesday covers only about a third of overall consumer spending, excluding services such as haircuts, hotel stays and plane tickets.
In the report, Neil Saunders, managing director of GlobalData, wrote, "Such a large uplift clearly signals that, regardless of economic or pandemic concerns, the consumer is determined to spend what it takes to have a jolly holiday season."
The Associated Press contributed to this report.
