The University of Michigan’s consumer sentiment index surged by 13% in December, reversing a four-month decline and bringing it back to August levels.
Despite predictions of a slowdown, the job market remains robust, and declining inflation expectations have driven improved consumer sentiment.
Additionally, a growing number of consumers are factoring in next year’s elections, particularly Republicans who are increasingly confident of winning back control. (Trending: Joe Biden Impeachment Formalized As Republicans Unite)
Director of the University of Michigan’s survey Joanne Hsu highlighted, “Sentiment for these consumers appears to incorporate expectations that the elections will likely yield results favorable to the economy.”
According to Gallup, “the amount Americans estimate they’ll spend on Christmas or other holiday gifts this year rose more than $100 to $975, the highest in Gallups’ November measures of seasonal spending since 1999. More importantly, this is a significant increase from the $923 estimate in Gallups’ October poll.”
“This is only the fifth time in the 18 years since 2006 that Gallup has asked the holiday spending question in both October and November that the average amount has increased between the two months. More typically, consumers’ spending estimate declines as the season progresses,” continued the pollsters.
“Last year at this time, U.S. holiday retail sales seemed poised to increase by between about 4% and 6%, according to Gallup’s modeling comparing its holiday spending estimate trends with actual holiday retail sales for each year, explained Gallup.
“In fact, average November-December 2022 retail sales (not including autos and gas) increased by 6.2%,” the report continued.
“The same modeling procedure applied to Americans’ restrained spending estimate this October suggested holiday sales would increase by about 4% — a relatively moderate rate of annual growth similar to the long-term average,” wrote the pollsters.
“Now, with consumers’ spending estimate rising to $975, it appears year-over-year holiday sales could grow by somewhere between 6% and 9%.”
Concluding, “That would be all the more impressive because inflation is running much lower this year than last year. So, a much bigger part of the increase would be a real rise in spending and not just consumers struggling to keep up with higher prices.”
This optimism has translated into increased holiday spending estimates, with Gallup reporting a significant rise in estimated spending compared to last year.
This suggests holiday sales could grow by 6-9%, despite lower inflation, indicating a real increase in spending.
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