What the Holiday Shopping Season Says about the State of the Economy

holiday shopping season

The holiday season is here and businesses across the country are gearing up for their biggest year yet. Retail sales growth is expected to be up 3.8 percent from last year according to the International Council of Shopping Centers (ICSC). And despite the popularity of online shopping, physical brick-and mortar stores are expected to contribute the most with 91 percent of shoppers buying from a physical location.

For the majority of retailers, the biggest earnings of the year happens in the 4th quarter during the holiday season. Considering that the stock market is at all-time highs and the U.S. economy is continuing on an upward trend, investors are anticipating a big year for retailers.

The consumer gauge

One of the biggest components of growth in the economy is consumer spending. And during the holidays, the post-Thanksgiving weekend tells the story of what investors can expect for the year.

Black Friday has traditionally been the single largest shopping day of the year with retailers offering single day sales to entice consumers. But recent years have shown that another similar holiday is even bigger for shoppers – Cyber Monday.

According to research by Adobe Insights, total spending for Cyber Monday this year is expected to hit a record high $6.59 billion with sales topping 16 percent year-over-year. The National Retail Federation recorded 116 million shoppers on Black Friday last year, but more than 122 million on Cyber Monday. The demand for shopping over the weekend is so high that many retailers are expected to carry over sales and offers into Tuesday as well.

The increased retail demand for the holidays tells investors that consumers have a lot of confidence and faith in the economy right now. Despite the slow rise of interest rates, consumers aren’t shy about spending money with savings taking a back seat. Even markets like real estate are showing resurgent signs of growth with high end housing prices jumping on increasing demand.

As consumers spend more this season, the economy should benefit – and investors along with it. More spending also means that wages are going up as well. It’s another positive takeaway that investors have about the current state of the US economy.

Despite the positives in the numbers this holiday season, investors will want to keep a close watch on the GDP data for the 1st quarter of 2018. Some analysts believe that the economy is at its peak and could start to contract next year. Only time will tell which direction the economy will take for 2018, but based on the data right now, there doesn’t seem to be much cause for immediate alarm.