Along with golden leaves and pumpkin spice lattes, the month of October officially signals the start of the holiday shopping season. Beginning with the back-to-school shopping period through September, past Halloween and onto the winter holidays, this 4th quarter period is hugely important for businesses, and for the American economy.
And this year, it seems like all signs are pointing towards an above average winter holiday shopping season. According to the Prosper Spending Score, the overall outlook for holiday gift spending in 2014 is up more than 8% from last year. Why are consumers feeling so jolly this year? 3 main factors are poised to drive consumer spending in 2014, to make this year one of the best spending seasons in a long time.
1. Higher Holiday Hiring
The brighter economy is driving up holiday hiring plans in what some analysts are taking as an upbeat sign for holiday consumer spending. Higher consumer spending and improved employment across the nation is enticing retailers to accept waves of new employee applications in preparation for the 2014 holiday hiring season, significantly outpacing 2013. This year, we could see retailers add more than 800,000 seasonal workers for the first time since 1999.
Why the big hiring push? Compared to last year there are a lot more people who have money in their wallets to spend. That means more traffic in the stores, and that means businesses need more people. And seasonal help is needed by more than just retail and supply chain companies. Hotels, catering services, valet parkers, Christmas tree lots, pop-up Halloween stores, travel companies, food distributors--the 4th quarter crush amps up demand in many sectors leading to increased demand for workers of all kinds.
2. Your Wallet Isn't Haunted Anymore
The International Council of Shopping Centers is out with its bellwether 2014 Halloween Consumer Spending Survey, and it shows that 74% of households are planning on buying Halloween-related goods, to the tune of $11.3 billion this year. The average family will spend $125 apiece on Halloween fun, and another 20% say they'll spend more this year than last year.
This is significant and particularly encouraging news because Halloween shopping isn't considered essential spending for consumers the way back-to-school shopping is. The fact that consumers are willing to spend more on discretionary Halloween purchases is a positive sign for the upcoming holiday shopping season--and therefore gives a good indication of the overall consumer psyche. In fact, consumer confidence levels are at a 7-year high, and shoppers aren't afraid to use their credit cards anymore, charging $28.2 billion in the 2nd quarter of this year--the most in six years. A strong showing for Halloween sales certainly bodes well for the upcoming holiday shopping season in November and December.
3. Defrosting the Economy
Since the end of the Great Recession, the economy has added 8.2 million jobs, and the unemployment rate has fallen from 10% to 5.9%. Indeed, the United States is on track to add roughly 2.5 million jobs this year, and wages and salaries increased 0.4% in August, the most in three months. Helped by these higher wages and salaries, personal income rose a modest 0.3% in August, slightly faster than a 0.2% July increase.
Consumer spending in August rose 0.5% from the previous month, the best result since spending also expanded 0.5% in June. The acceleration in consumer spending added to signs that the economy is sustaining strength and momentum. Figures from the U.S. Census Bureau also show a consistent growth in e-commerce sales, which totaled $75 billion in the second quarter of this year. And despite recent events in energy-producing areas of the world, gas prices have held steady, also sustaining consumers' spending power. However, although consumers are heading back to the mall, their pre-recession shopping behaviors persist, and consumers will still actively seek out deals and discounts, use credit card perks like points and cash back for purchases, and search online for the best value.
Bolstered by these encouraging economic factors and intensifying consumer confidence, Deloitte anticipates that U.S. holiday retail sales for 2014 will increase by between 4% and 4.5% year on year to between $981 billion and $986 billion. The anticipated ramp up in consumer spending, which accounts for almost 70% of the economy, will help put the American recovery on better footing. And this year's holiday shopping season is poised to be one for the record books.