Here we are, just a few short days away from Christmas and the end of 2023. If, like me, you feel like time flew, you’re in fantastic company. Speaking of time passing, last week, the US Census Bureau released retail sales results for November. It is one of my favorite barometers for getting a good sense of the consumer’s mindset regarding how much money we’re spending and what we spend it on. This time, we’ll remember that November is typically when holiday spending officially kicks into high gear, starting with kickoff events like Black Friday and Small Business Saturday. Then, of course, there’s Cyber Monday. It is also important to note that potential drags on our wallets like inflation, unemployment, and the resumption of student loan repayment programs have all been cited as likely spending “grinches,” if you will.
So, let’s dive in.
Overall, spending rose to $705.7 billion in November, up nicely from $703.7 billion in October. Chip West, retail and consumer expert at Vericast, took on the theory of wary consumers in response. “Consumers appeared to get a solid start to the holiday shopping season,” he writes. “Their spending patterns do not align with their reported sentiment.”
That jittery consumer is a trope that’s come up a lot this past year. In theory, whether these nervous shoppers were cutting back in one area to afford another or panicking at the gas pumps, an overture of pessimism often accompanied the trope. To debunk this consumer profile, Chris Zaccraelli, chief investment officer for Independent Advisor Alliance, was bullish on the consumer, “The death of the consumer—as well as the economy—has been greatly exaggerated,” he writes. “And the much-hyped recession of 2023 isn’t going to materialize.”
As we look closer at where and what consumers spent, several categories in November shake out stronger when compared to October. Motor vehicles and parts dealers rose to $134,504 billion in November from $133,804 billion a month prior. Perhaps unsurprisingly, given the holidays and subsequent feasting, food and beverage rose to $82,839 billion from $81,713 billion, and grocery stores, a subgroup within that category, rose to $74,312 billion from $74,248 billion. Two categories that had yet to see much enthusiasm of late also increased in November. Home furnishings rose to $10,736 billion from $10,642 billion, and clothing and accessories rose to $26,115 billion from $25,970 billion.
“Consumers are now showing clear signs of being skilled in dealing with significant challenges, including higher interest rates, persistent inflation, and elevated costs of necessities like food and shelter,” writes West.
Speaking of challenges, it wasn’t an across-the-board spike in spending. The pendulum also swung to the decline side in several categories. Building materials and garden supplies slid to $41,295 billion from $41,445 billion. Gasoline stations fell to $54,444 billion from $56,072 billion. As many of us may recall, fuel enjoyed a significant boost right around the summer months. This cool-off is likely related to a decline in gas prices, but it remains worth consideration and one to watch going forward. General merchandise also fell, hitting $72,906 billion from $73,020 billion. Department stores, a subcategory within that, also declined to $10,534 billion from $10,803 billion.
Jeffrey Roach, chief economist for LPL Financial, notes that things look more in favor of consumers now: “The consumer is becoming more price conscious, looking for bargains at online retailers. Retailers will have to be creative to keep consumers engaged amid a potential turning point in the macro landscape.”
My favorite category in this report (affectionately nicknamed the “treat yo self” category) also, unsurprisingly to me, grew in November. Health and personal care went up to $37,812 billion from $37,481 billion, and dining and drinking establishments rose to $94,697 billion from $93,184 billion.
Several coming potential spending events like Holiday rush 2.0 (read: last-minute shopping) and the possible increase in energy costs as we heat our homes for winter should shape December’s numbers, which will also give us year-end and Q4 information to round out and conclude spending tallies and totals in 2023. We expect it to come out on January 14, 2024.