RANCHO CUCAMONGA, Calif. – Mixed economic signals are leaving consumers “feeling uneasy” ahead of the holiday shopping season, according to Co-op Solutions, which is forecasting slower sales growth during the holidays.
According to the new Co-op analysis, October spending trends showed strong monthly increases in both debit and credit in categories, including Amazon/Bookstores, Entertainment and Giving/Political. Sports and Recreation, as well as Campers and Camping, declined as temperatures began to fall, Co-op added.
Overall, credit spending was up 4.3% for the month, while debit showed a slight increase of 0.8%, Co-op reported.
The Trends
Co-op’s SmartGrowth team’s analysis of the data highlighted a number of trends, including:
Signs Indicate Slower Sales Growth
“The National Retail Federation is expecting slower growth this holiday shopping season. The industry trade group recently predicted sales will rise between 6% and 8% to between $942.6 billion and $960.4 billion from Nov. 1 through Dec. 31,” Co-op said. “Despite this year’s slower growth versus 2021, which saw spending rise by over 13% compared with the pandemic-burdened 2020 season, this year’s anticipated sales total would still represent a record.”
Although consumers are expected to purchase fewer gifts this year, the overall spend per shopper will likely remain on par with last year due to the rising costs of merchandise, according to Co-op.
“Retailers are trying their hardest to extend the holiday season this year,” said John Patton, Co-op senior payments advisor. “They kicked off very early sales to entice cautious shoppers onto the sales floor. Although these early events – like Amazon’s extra Prime Day in October – did not achieve the level of sales that retailers were hoping for, by the end of December most will likely see lifts over last year.”
Travel Spending Remains Resilient
While inflation is dampening consumers’ gift-buying intentions this year, it has not seemed to affect their appetite for travel, Co-op said, adding, “According to major travel and lodging firms like Royal Caribbean, Hyatt and Hilton, bookings are up, and people are willing to spend more on experiences now than during the height of the pandemic.”
That finding is supported by Co-op’s credit union payment portfolio data, the CUSO explained. “October credit spending in the Travel merchant category is up 3.1% in debit month over month. And year over year, the category is up by 45.1% in credit and 15.8% in debit.”
Co-op said its spending forecasts show continued solid growth in credit for the Travel category right through the holidays.
“We expect travel spending continuing into November with positive month-over-month growth, before flattening out in December and January,” said Beth Phillips, director, Co-op Solutions. “This points to a surprisingly resilient sector, thanks to a pandemic-weary public that has pivoted to seeking out experiences over purchasing home goods, furnishings, toys, autos and other tangible goods.”
Credit Card Debt Hits Pre-Covid Levels
“Many consumers may be shifting from high-end department stores and boutiques in favor of discount retailers, but those who continue to spend are increasingly dipping into their savings and borrowing on credit to do so,” Co-op said.
The CUSO cited Wall Street Journal reporting showing overall credit card debt has for the first time returned to pre-pandemic highs, pushing total card balances to $916 billion in September,
“Balances have gone up on credit cards and there's this perspective in the marketplace that suggests that consumers are trying to hold some cash back in reserve,” said Patton. “Unfortunately, inflation is still an issue and many consumers may find themselves in difficult straits these coming months, especially over the winter as the costs of heating fuel costs are expected to rise significantly.”
Month-Over-Month Category-Level Spending (Comparing October 2022 to September 2022)
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