Holiday Spending Set To Hit 12-Year High Thanks To...Debt

Even though consumer confidence cooled for a second straight month in November, CNBC is reporting that holiday spending for the average American household is on track to be the highest in 12 years.

Amazingly, the CNBC All-America Survey found that the average family will spend $900 for the first time in the 12-year history of the poll, eclipsing last year"s estimate of $702 by a wide margin.

Furthermore, the survey of 800 American households - which has a margin of error of plus or minus 3.5 percentage points - found a surge in the percentage of Americans planning to spend more than $1,000. The number climbed to 29%, up from 24% last year.

But before economists and retail analysts begin recalibrating their expectations, it’s worth noting that much of this spending will be funded by debt. Another study by RentCafe which examined spending habits of American renters discovered that, in the 50 largest US metropolitan areas, the average renting family will go into debt due to holiday-related expenses, debt that must be paid off in the opening months of the following year.

Here’s what an analysis of the average renter’s household budget for November and December looks like. As the chart shows, the average American family of four can spend $5,865 during that period without dipping into savings or going into debt.

The numbers are based on the median renter household income according to the U. S. Census Bureau, November’s average rent according to Yardi Matrix, average cost of living data from the Bureau of Labor Statistics, and a survey conducted for the National Retail Federation that reveals how much American consumers plan to spend on average this holiday season.

Based on this data, RentCafe concluded that the average American family of four spends about 2.8% of their annual income on winter expenses. (See more details in the methodology).

RentCafe then broke the data down for each of the 50 largest cities in the US. They found 24 areas where the average family finishes the holiday season with a positive balance...

...they are...

Then, RentCafe tabulated which cities were the most expensive for the average family. Expenses factored in the estimated costs of gifts and holiday-related dinners.

Unsurprisingly, New York City tops the list, followed by Boston and San Francisco.

Trying to figure out where you fit in on this spectrum? RentCafe has a tool on their website for readers to calculate how they will finish the year after holiday spending.

Circling back to the CNBC data, experts pointed at the stock market - the so-called wealth effect - as one factor that might inspire people to spend more this holiday. Because, in the eyes of many Americans, the market is the economy - a fact that President Donald Trump seems to have latched on to.

"The holiday spending outlook is stronger than it has been in over decade," said Micah Roberts from Public Opinion Strategies, the Republican pollster for the survey. "People are more comfortable with where the economy is and where it"s heading, prompting them to spend money this holiday season and help boost the economy as well." Jay Campbell of Hart Research served as the Democratic pollster.

The Vice & Virtue Index: How Our Spending Changes In January

Originally authored by the Priceonomics Data Studio

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After the bacchanal that is the December holidays, an estimated 44% of Americans will attempt to right the ship by making New Year’s Resolutions. According to a survey by Marist, resolutions will range from the subjective (“be a better person”) to the quantifiable (“lose weight”, “spend less money”).

That second category of goals is measurable, and it got us thinking: do resolutions leave their mark on consumer data? Do we actually spend money differently in January than we did in December? We wanted to find out, so we analyzed data from Earnest, a Priceonomics customer. We analyzed a dataset of more than 10,000 anonymous user responses on spending habits.

We found that spending patterns lined up with common self-improvement targets. After the holidays, spending dropped in “vice” categories like alcohol, fast food, and beauty. At the same time, there was an uptick in spending on “virtue” categories like health clubs and diet foods.

It turns out we do put our money where our mouth is when it comes to New Year’s resolutions. At least in January that is.

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First, we looked at the relative popularity of seven spending categories that run the gamut from virtue to vice. In the table below, we show the percentage of users who reported spending in each category, and calculate how it changed after the holiday season wrapped.

Data source: Earnest

Of the four spending categories that dropped in popularity between December and January, three are in our vices category. In December, nearly 20% of us spent on booze, but that figure dropped by a quarter in January. This could reflect participation in sobriety efforts like Dry January, as well as the simple fact that we party less after New Year’s.

Vanity and gluttony were more popular in December, too: with appearances to make at holiday parties, more of us spent at salons, and holiday shopping trips meant more fast food dinners.

In contrast, the most virtuous categories saw gains in popularity after the holidays (even though they remained least popular overall). In January, the percent who spent on diet food doubled, and 10% more invested in gym memberships.

We also looked at the average amount spent among users who reported purchasing in each category. The results are tabulated below, with a column to indicate how spending changed after the end of the holiday season.

Data source: Earnest

We saw the biggest drop in spending on purchases from Amazon.com. Not surprising, given that more than half of U.S. shoppers rely on the site for holiday gifts.

The vice categories alcohol, salons, and fast food also saw sizeable spending drops after the holidays. While we may over-indulge in December, we cut back in January. Accordingly, diet food was the only category that saw an increase in spending after the holidays.

Though more people made it to the gym in the new year, the average amount they spent there decreased in January, albeit by $1. This slight drop could be the effect of gym membership specials intended to lure folks with fitness-centric resolutions.

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Our data illustrate a binge-and-purge cycle to holiday spending. In December, we indulge in liquor, beauty treatments, and fast food. But we reverse course in the new year, dialing back spending on vices, and making investments that will help us stay healthy.

BofA Finds Consumer Spending Tumbled In December, Warns Of Disappointing Retail Sales

With this week"s most important economic data point - this Friday"s retail sales - fast approaching, economists are keen for clues if this key datapoint giving insight into the health of the US consumer will maintain the recent outsized spike in favorable and better than expected economic data, or if adversely, it may be a downward inflection point which could have significant implications on the dollar trade as RBC explained earlier. And according to BofA"s internal debit and credit card data, always released just ahead of the retail sales report, it looks like it will be the latter.

As Bank of America"s chief US economist Michelle Meyer reports, the aggregated BAC credit and debit card data showed that retail sales ex-autos declined 1.0% mom seasonally adjusted in December. "This contrasts with other indicators of consumer strength including reports of a robust holiday shopping season, a rebound in consumer confidence and strong autos sales" according to Meyer.

Actually, based on earnings reports of those companies who have recently closed their quarter, a weak December is precisely what one should expect, further corroborated by JPM"s satellite imagery at early December showing empty parking lots (recall: "Satellite Imagery Reveals Sharp Retail Spending Slowdown After The Election") and a plunge in brick and mortar sales, which has been greater than the offsetting pick up in online sales.

This is how the bank"s adjusted retail spending data looks when charted.

As BofA notes, "the BAC aggregated card data showed that retail sales exautos declined 1.0% mom SA in December. This reversed the strong gains over the prior few months, leaving the 3- month average growth rate to slow."

Amusingly, while in the past everyone ignored seasonal adjustments when it comes to retail sales (a reconciliation which as we have shown on various occasions, would always undermine the adjusted data), this time it is BofA which tries to justify the weakness with seasonal adjustments. This is how it "justifies" the sharp drop in data:

We think the explanation is that our BAC aggregated card data is biased lower due to our seasonal adjustment process. Note that the Census Bureau uses a similar approach, and therefore, we expect their data to be subject to a similar downward bias.

The two major holidays in December — Christmas and the New Year — are fixed in terms of the date but not in terms of the day of the week. This year, Christmas Eve and New Year’s Eve both fell on Saturdays. Spending on those dates was much weaker than on a typical Saturday, presumably since people were enjoying the holidays. However, the seasonal adjustment process treated these days like any other Saturday. This suggests that the adjustment process “over-fits” the data and biases the seasonally adjusted figures lower.

We think the bias in December should correct in January, translating to strong growth in January. A strong gain in January would support our view that the weakness we are seeing in the data is simply “noise”. However, that means waiting until February 15th for the January data to provide confirmation.

Unless, of course, January data does not rebound, in which case that bank"s economists can simply blame the "abnormally cold weather" for the lack of spending, as they have every time over the past three years.  Even so, with that caveat in mind, BofA warns, "since the Census Bureau uses a comparable approach, we think it is prudent to prepare for a similarly negative number in Friday"s report."

And while the December, or even January, data may surprise to the up, or downside, due to quirks in seasonal adjustments, reporting, one thing is undisputable: long-term spending trends, especially when it comes to goods and products, continue to deteriorate. Here"s BofA:

• The sector data suggests that consumers continue to spend on experiences, with airlines and lodging spending up impressively over the prior three months. Presumably, consumers are taking trips around the holidays.


• On the flipside, consumers appear to be spending less on goods, with particular weakness in electronics spending, home goods, and clothing. As we also show in Chart 6, spending at restaurants continues to weaken.

Also, as a result of surging gasoline prices, spending at gasoline stations is rebounding but only due to nominal spending increases. Which means less disposable income available to be spent on other potential purchases. 

And here is the evidence:

Restaurant spending is tumbling

Furniture and home improvement spending has flatlined

Spending on young adult clothing has tumbled.

Spending at food and beverage stores is growing at the lowest rate in 5 years.

And finally, luxury spending - that traditionally reserves to the upper middle and higher classes- continues to crash.

So aside from all that, the consumer is doing great.