As Americans prepare for the new holiday seasons, US retail sales are on the rise, pointing to resilient consumer demand. However, with important issues still plaguing the world, like the recent spike in the number of new COVID-19 cases in the UK, an ongoing conflict in Ukraine, and surging inflation, many are worried about the near future. Experts like Nick Handrinos, vice-chairman at Deloitte Consulting LLP, are now warning that inflation will influence consumer demand, meaning consumers are likely to continue to shift how they are spending their budgets this holiday season.
According to Reuters, people in the US started buying more and more cars in August, as gasoline prices decreased, and they have also started spending more money in bars and restaurants. However, according to the same source, demand could begin to cool down, as the Federal Reserve continues to raise interest rates to curb inflation. That already appears to be happening in some industries, as recent data shows that US light vehicle sales fell short of expectations in September. Nevertheless, with retail sales rebounding since August, many still hope that Americans will enjoy a great holiday season.
Retail Sales Could Grow 7.1% During the Holiday Season
According to the Mastercard SpendingPulse holiday forecast for 2022, retail sales in the US (excluding the automotive sector) could increase 7.1% year-over-year. The report keeps track of all physical and online retail sales across all payment methods, but is not adjusted for inflation. This data suggests that the upcoming holiday season will reshape the industry and bring another positive retail season. Omnichannel offerings and heavy promotions will probably be the main factors to influence growth, and retailers are likely to see many consumers return to traditional stores.
Michelle Meyer, US Chief Economist at the Mastercard Economics Institute, points to the fact that consumers could also be looking for ways to help them navigate the inflationary environment. They will probably try to find the best deals, and make trade-offs that allow for extra room in their gift-giving budgets. Moreover, consumers are also expected to start looking for the best deals as early as October, in order not to risk that their favorite items will go out of stock. Just like the previous year, Christmas shopping is expected to start early in 2022.
If the COVID-19 pandemic and its many consequences were the biggest issues retail faced last holiday season, inflation remains one of the most important concerns to consider this year. However, other issues may quickly become equally concerning.
Issues that Could Impact Retail During the Holiday Season
One of the most essential issues to consider is probably the fact that Americans are indeed spending more and more money shopping, but this could also be a consequence of the higher prices they are now paying because of inflation. According to MarketWatch, retail spending remained the same during the past year, considering inflation. While the US economy is showing signs of recovery, retailers are selling the same amount of products and services as they were in 2021, after inflation is taken into account. This could become even more problematic for American retailers, considering the fact that customers also expect significant discounts before and during the holiday season.
While issues such as rising inflation and the ongoing conflict in Ukraine are likely to continue to impact the retail industry this holiday season, other critical issues are also to be expected. According to CNN Health, recent data suggests that a new spike in COVID-19 cases may soon occur in the United Kingdom (UK). However, some experts believe that the new wave could also impact the US in the near future, giving both policymakers and American companies new cause for concern. Although the rise in the number of cases has not been linked to a new strain of the virus, at least for now, multiple new variants seem to become more dangerous in both countries.
Dr. Tim Spector, professor of genetic epidemiology at King’s College London, has gone as far as to say that recent data shows that this is the beginning of the next wave of the COVID-19 pandemic. While the information is concerning for retail and most other industries around the world, the available vaccines, boosters, and treatments are likely to contain the new surge and give Americans the chance to enjoy a good holiday season.
