Consumer Says: What to expect this holiday season

What's new in the economy?

• Inflation, as measured by the Consumer Price Index, increased to 2.6% in October, up from 2.4% the previous month. Services, and particularly housing, continue to prop up inflation above the Federal Reserve’s 2% target. 
• Speaking of the Fed, public comments made by Chair Powell last week suggested that the Fed may pause on rate cuts at their December meeting. Although some labor metrics continue to soften, the unemployment rate was 4.1% in October, down from a recent peak of 4.3% in July, making the Fed more comfortable with the current level of interest rates. Morning Consult’s daily unemployment index (updated here every other week) has also been trending down from its recent peak in September.
• Indications of a potential rate pause spooked stock markets, reversing some of the gains made in the wake of the U.S. election results. Markets seem to be taking a mixed view of the election outcome: while stock markets rejoiced at potential deregulation and lower corporate tax rates, bond markets have been pricing in uncertainty around the incoming administration’s policies – for example, 10-year treasury yields began climbing in late September and continue to stay elevated despite the Fed’s easing monetary policy.

Consumer says...

It’s almost that time of the year! As we approach the holiday season, we sat down with retail expert Claire Tassin to discuss trends for the 2024 holiday season. We discuss her recent research on what factors will define the upcoming holiday’s shopping trends (hint: inflation weighs heavily on the minds of consumers), how different generations shop, which types of gifts are most popular, and how consumers with tighter budgets are managing their expenses. In addition, we touch on our recent report: The Economic Outlook for the Holidays. Check out the full report for more!

Head to our Youtube or Spotify channels to hear the whole conversation with Claire. If you’re short on time, here’s a brief summary of the main topics of discussion:

Q: What’s the main trend for the 2024 holiday season? 

A: Economic pressures and inflation are, resulting in mixed feelings this holiday season. While many feel stressed about finances, there is generally more positive sentiment, as people prioritize preserving traditions, celebrating, and spending time with loved ones, even if it requires some financial sacrifice.

Q: What do you expect to see from households that have tighter budgets this year?

A: Households under financial stress are more likely to rely on credit or buy-now-pay-later loans to cover holiday expenses, while others balance celebrations with modest debt. Many consumers, however, have savings set aside, and most adjust their everyday budgets—cutting back on daily expenses—to afford gifts, celebrations, and travel, prioritizing meaningful holiday traditions.

Q: Are there certain gifts consumers are prioritizing, especially when they’re on a tighter budget?

A: Among the survey takers, gift cards are always the most popular gift option, followed by clothing and toys. Gifts and celebrations are the top priorities for people this holiday season, whereas travel is more of a stressor that may be de-prioritized, especially if the distance needed for travel is far and would require a flight. 

Q: Are there any big differences in trends between generations when it comes to shopping for the holidays? 

A: Yes there are big differences, namely that younger generations prioritize more sentimental or fun/entertaining gifts whereas older generations prioritize gifts that are more practical – think of that old trope of your grandma getting your socks every year. 

Q: What can retailers do to draw more excitement around holiday shopping? 

A: Discounting is one obvious way, but another we’re hearing from particularly younger consumers is an interest in more in-store activations and events.

Q: Any fearless forecasts for this year’s Black Friday?

A: As is typical, this year’s Black Friday sales will probably beat records. We see a lot of consumers doing their shopping on Black Friday not just for gifts, but also for themselves, which plays into the hugeness of the event. 

Further reading: 

• Following the election, there were immediate moves in consumer sentiment. The expected swap in sentiment from Democrats and Republicans happened almost immediately, but sentiment for the average adult also ticked up, driven by optimism for the economic future. Read more in depth analysis here. 
• Just as the Federal Reserve has begun to cut rates, Morning Consult’s indexes are showing some signs of tightening supply pressures, potentially increasing risks of a resurgence in goods inflation.