2018 Christmas Spending Set to Reach Record Highs

The holiday season is soon to be upon us, and that means that you can prepare yourselves now for the ugly sweater parties, family gatherings and other activities that typically characterize the Christmas season.

The holidays are also the season to be giving, and according to various retail forecasts, Americans are going to be giving in record numbers this year. In fact, according to eMarketer, Christmas spending is expected to surpass the $1 trillion mark. That’s a new record, and a sign of the biggest projected year-over-year spending increase since 2011.

So what can you attribute to that extra gift with your name on it under the Christmas tree this year? There are a variety of factors that play into the projected spending amount – and they all have to do with a bustling economy. Let’s take a look.

For the purpose of this projection, eMarketer defines the holiday shopping season beginning on November 1 and ending on December 31. If the $1 trillion projection stays true, that will mark a 6 percent growth in spending from last year’s holiday shopping season. What’s also encouraging is that this projection is coming amid bankruptcies and store closings of traditional outlets such as Sears and Toys R Us. Here’s a look at why this holiday season is expected to shatter spending records:

  • Low unemployment: One of the reasons why spending is expected to increase by 6 percent from a year ago is because people have the means to do the spending. The U.S. unemployment rate has hovered between 3.5 and 4 percent this fall and summer, and the job market has been adding more positions than it has been eliminating. That’s great news for workers everywhere, as there’s opportunity abound.
  • Tax reform: Another big reason for higher holiday spending – tax reform. American workers have seen their paychecks increase over the past year thanks to the Tax Cuts and Jobs Act. What’s more is that many employers are passing on their corporate tax cuts in the way of holiday bonus checks to thank their workers for a job well done. President Trump signed the Tax Cuts and Jobs Act right before Christmas a year ago, and it’s played a big role in American workers having more disposable income and companies improving their bottom lines.
  • Convenience: While brick-and-mortar shopping is a large part of overall holiday spending, online shopping continues to be on the uptick during the holidays. In fact, online retail sales are expected to experience double digit growth during this period, specifically to the tune of 16.6 percent from a year ago. A big part of the reason for the increase in online shopping is its convenience. Rather than putting in the effort of going to the store and searching for the items they want, consumers can simply pull up their web browser and order it within minutes. Special promotion days, such as Cyber Monday, also help with the anticipated online sales increase.
  • Brick-and-mortar stores are upping the ante: Despite online’s ascent, brick-and-mortar shopping is largely still king. In-store purchases are expected to increase by about 4.5 percent from last year, and a lot of it has to do with retailers enacting better ways to compete with the online giants. For instance, many retailers have remodeled their stores to make for a better shopping experience. Others are adopting innovative technology to make checkout faster and easier. Finally, many also offer consumers the ability to buy online and pick up in store to save on shipping costs. While it’s true that some brick-and-mortar stores have folded or are struggling, the ones willing to invest in their operations are likely to see the biggest gains.

So get your ugly sweater ready, start filling our your Christmas cards and don’t forget to make a gift list (and check it twice). And while you’re setting your spending budget, chances are you’ll have found yourself in a better position to buy than you did one year ago. It’s a reflection of the strong economy, and a good economy is another thing to celebrate and be thankful for this holiday season.

Tis’ the season to be spending!


Ethan Warrick
Wealth Authority

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