How Holiday Shopping Has a Dramatic Impact on the Economy

The more we spend, the better the economy performs: Consumer spending accounts for nearly 70 percent of the GDP.

But where does holiday shopping fit into that statistic?

Kleinhenz says that’s a difficult question to answer. “You have to look at one side of the equation from the retailer side, which is what gets sold,” he says. “And the other side is what gets purchased.”

But we do know that for retailers, a lot hinges on this time of year: About one in every five sales is made in November and December, he says.

“In general, the holiday season is the most important time for retailers. You see a big influx of sales during this time, says Courtney Jespersen, NerdWallet’s retail expert. ““Retail spending is a reflection of the economy.”

And right now, the economy is doing well. More people are working, and wages have increased faster than inflation. In September, consumer confidence also rose to its highest level since 2007, according to data released by the Conference Board, a business association.

But it isn’t as easy to answer from a consumer standpoint because consumer spending also encompasses all of the services you pay for, like cable, eating out and health insurance.

And only one-third of consumer dollars go toward purchasing goods like furniture, clothing, food, snow shovels, Kleinhenz says.

“Most spending by consumers is not for goods, it’s for services,” he says. (But interestingly though not surprisingly, services are often the first to go during recessions or when consumers otherwise tighten their budgets.)

Still, we can say with certainty that holiday shopping is up. Americans are spending more, based on the NerdWallet report, and Kleinhenz says data shows retailers will see about 3.6 percent more sales than last year.

Statistically, the Saturday before Christmas — Dec. 17 this year — is the biggest shopping day of the season per consumer surveys.

“This is the last-ditch effort for people to get out to buy gifts,” Kleinhenz said. “For all those procrastinators, this is a big day.”

Both Jespersen and Kleinhenz said that while the election didn’t impact numbers for holiday shopping, it did shift when people are buying. “The election dominated a lot of news coverage and headlines,” Jespersen says. “Some of the attention [on shopping] was pushed after the election. Shoppers are in full swing now.”

The impact of holiday shopping doesn’t end right before Christmas either.

Dec. 26 is one of the busiest shopping days of the year, Jespersen says. “Everyone is going back to the store and returning items,” she says. And because some stores only give merchandise credit, there are still lots of sales to be made.

Kleinhenz also says that January is becoming a big month for consumer spending thanks to gift cards and after-Christmas sales. “It will be a positive development as move into 2017,” he says.

Other holiday shopping trends are still shifting.

Retail prices are down, thanks to a stronger dollar and more retail competition. People aren’t buying less, though.

“In retail the last couple of years, people are benefiting from lower prices,” Kleinhenz said. “There’s deflation, not inflation. Prices are lower this year in retail than last year. So now I can buy more with less dollars.”

In the NerdWallet survey, millennials were spending less for holidays gifts than other generations. But that’s partly because they don’t have as many credit cards and some don’t have families yet.

That will all change. “Once they get older and make more, they are likely to spend more,” Jespersen says.

Still, millennials are also a unique generation: They are more impulsive shoppers and they overshoot their budget more often. “Some of their habits might become more commonplace and prevalent,” Jespersen says.

And while shopping online has played a huge role this season, Jespersen says, according to the NerdWallet report, only six percent of those surveyed did their holiday shopping online exclusively.

“What that statistic can tell us is there is still a market for shopping in-store,” she says.

Adds Kleinhenz: “We’ll see the consumer gravitate more toward e-commerce. It’s easy, it’s convenient, it tends to be cost-effective… But I don’t believe that brick and mortar retailers are going to disappear. People still like to go out to touch the fabric, see the product, and it’s also part of recreation and entertainment.”

Jespersen also says the survey indicated that shoppers feel overwhelmed this time of year (maybe rightfully so if they are spending more than $600). And the majority of Americans weren’t sure they were getting the best deals.

But there are ways to prevent that, she says: Plan ahead and do your research.

But, for the sake of the economy, keep shopping.