Holiday shoppers increase spending by 3.8 per cent despite higher prices

Sales rose this year during the holiday shopping season even as Americans wrestled with elevated prices for many groceries and other necessities, according to new data.

Holiday sales from the beginning of November through Christmas Eve climbed 3.8%, outpacing the 3.1% increase from a year earlier, according to Mastercard SpendingPulse, which tracks all kinds of payments including cash and debit cards. The last five days of the season accounted for 10% of the spending.

This year, retailers were even more under the gun to get shoppers in to buy early and in bulk since there were five fewer days between Thanksgiving and Christmas.

Michelle Meyer, chief economist at Mastercard Economics Institute, said the holiday shopping season “revealed a consumer who is willing and able to spend but driven by a search for value” as seen by concentrated online spending during the biggest promotional periods.

Sales growth was higher than the 3.2% increase Mastercard SpendingPulse had projected this fall. The data released Thursday excludes the automotive industry and is not adjusted for inflation.

Clothing sales rose 3.6%, with most of the growth being fueled by online shopping. Spending on restaurants, and sales of electronics and jewellery also grew. Online sales jumped 6.7% from a year ago and in-person spending rose 2.9%.

Consumer spending accounts for nearly 70% of US economic activity and economists carefully monitor how Americans use their money, particularly during the holidays, to gauge how they’re feeling financially.

The most recent government data on consumer spending, released on Dec. 17, showed shoppers stepped up activity at retail stores last month. But auto dealer sales drove most of those gains as huge storms created a need for new cars in parts of the southeast slammed by Hurricane Helene in October. Big discounts at many retail chains also attracted shoppers.

But the report also hinted at some consumer caution as sales at grocery stores, clothing shops, and restaurants fell. Outside of car dealers and online retailers, sales gains were modest.

Retailers felt more pressure this year due to the shorter holiday shopping period, and also from a presidential election that captured the attention of many consumers. Sales of general merchandise slid 9% in the two weeks ended Nov. 9, according to Circana, a market research group. Sales have been rebounding but stores will have to make up for those losses.

A broader picture of how Americans are spending their money arrives next month when the National Retail Federation, the nation’s largest retail trade group, releases its combined two-month statistics based on November-December sales figures from the Commerce Department.

The group expects that shoppers will have made $979.5 billion to $989 billion worth of purchases in November and December, which would represent a 2.5%-3.5% increase over the same two-month period a year ago. That would be a slower rate than the 3.9% increase from holiday 2023 over holiday 2022 season.

Overall, retailers had a decent start to the unofficial kickoff to the holiday shopping period despite lots of discounts that started as early as October.

US retail sales rose 3.8% between Nov. 1 and Dec. 24, as intense promotion to drum up sales in what was expected to be a highly competitive holiday season for retailers prompted last-minute shopping among consumers.

The sales jump was well above a 3.1% increase last year, handily beating Mastercard’s forecast in September of a 3.2% rise, with the last five days of the season accounting for 10% of all holiday spending.

Major retailers including Walmart, Target and Amazon.com ramped up promotions and value messaging to entice customers amid a shorter-than-usual holiday season with just 23 days before Christmas.

“The holiday shopping season revealed a consumer who is willing and able to spend but driven by a search for value as can be seen by concentrated e-commerce spending during the biggest promotional periods,” said Michelle Meyer, chief economist at Mastercard Economics Institute.

Online sales rose at a faster pace of 6.7%, compared with a 6.3% rise last year, with the apparel segment seeing strong demand.

Mastercard said consumers were “value-minded” and shopped at both brick-and-mortar stores and online platforms in search of attractive deals.

Low-cost e-commerce firms Shein and PDD Holding’s Temu as well as short-video app TikTok witnessed a surge in popularity ahead of Black Friday and Cyber Monday shopping events.

Retailers also experimented with generative AI for customer service and product search, and tried to improve curbside pick-up and delivery services, as they jostled to offer a smooth shopping experience.

Walmart and Amazon.com saw record-breaking sales on Black Friday and Cyber Monday, spending data earlier this month showed. In contrast, Target and Best Buy struggled to drive sales.

Consumers showed strong preferences for experiences such as dining out, with restaurant spending growth up 6.3% from last year, Mastercard data showed.