Keller @ Large: Will this holiday season be a boom or a bust?
BOSTON - Despite high inflation and rising interest rates, the government says Americans shopped more in October. U.S. retail sales jumped 1.3% last month and are up more than 8% over the past year.
This week, Walmart and Home Depot saw better-than-expected quarterly earnings. At the same time, Target is struggling. The big box retailer says it saw signs that shoppers are now cutting back their spending. So it's now planning to offer big discounts to clear out inventory.
Do those mixed reports mean we're headed for a tough holiday shopping season for retailers? They're worried that with inflation pushing 8% and gas prices inching back up after a downward trend, consumers may feel they're at the mercy of forces beyond their control like COVID, Russia and the Federal Reserve.
But "in this day and age, the consumer has all the power," says Jon Hurst of the Massachusetts Retailers Association. He says his members are concerned shoppers may decide to just stay home and wait for deeper price cuts. "You gotta shop like jobs depend on it, because they do," says Hurst. "We've got to keep some of these dollars in our communities if we want some of our main streets and our small businesses to be viable going forward."
"The media has tended to blow up this negative psychology," says Boston College economist Brian Bethune, who believes there's every reason to be bullish on holiday shopping and meet retailers halfway. Overall economic growth has picked up in recent months as supply bottlenecks have eased. Prices for some items, like used cars, have come back down to earth.
And Bethune suggests last week's election results show the public mood is not as dark as some believed. "The presumption was that because consumers were so grumpy, there'd be this huge political wave that would hit during the midterms. Well, didn't happen."
Consumer spending is such a big part of the economy, 70% by some estimates. What other factors might make this a stronger-than-expected season?
Hurst says there's no doubt retailers will be trying to offer discounts that weren't available last year because inventories were tight. And here in Massachusetts, millions of us will be getting a little extra dough in the form of those income tax rebates the state is rushing out in time for the shopping season.