Consumer confidence has faltered very slightly in the past few months. Third-quarter gross domestic product posted a 1.9% improvement. Despite these warning signs, Christmas spending is expected to reach an all-time high this year. That, in and of itself, would be a sign the consumer will continue to bolster the American economy through the end of the year.
New research from Gallup shows that Americans plan to spend on Christmas an average of $942 each this year. It is the highest level ever, based on Christmas spending polls Gallup does every October. Impressively, the figure is up from $885 last year. The best level in the past decade and a half was $909 in 2007, just before the Great Recession. The latest poll was in the field from October 1 through October 13, 2019.
Gallup researchers also found that 37% of Americans plan to spend over $1,000 this Christmas, another record. More people than ever expect to lift their spending from the prior year. Gallup commented, “As is typical, the largest segment of Americans, 65%, say they will spend about the same on gifts this year as they spent a year ago. However, the current poll marks only the second time in nearly 50 Gallup readings since 1990 that a numerically higher percentage of Americans intend to spend more on gifts (18%) rather than less (16%).”
Gallup pointed out that, after October, people often revise downward what they say they will spend for Christmas. Consumer confidence could be undermined by the trade war with China, although that has been going on for months without creating a major erosion in consumer sentiment.
Two important tailwinds could lift holiday spending. First is the unemployment rate. In October, it was 3.6%, still near a five-decade low. Joblessness is so low that many companies have found it challenging to find new workers. Second, the Federal Reserve has cut interest rates again. In theory, that should stimulate the economy and lower borrowing costs.
The current economic recovery is one of the longest, if not the longest, in U.S. history, stretching back to June 2009. Many economists have predicted its demise. However, economies vary widely from state to state. In some, the number well off people is very high, and in others the figures are relatively low. If Christmas shopping patterns in 2019 look anything like Gallup shows they could be, the expansion has at least a few more months to go.