Party On—The American Consumer Picks Up the Pace

by | 26 February 2018

The 2017 holiday season recorded a much better than expected bump in spending of 5.5 percent over the previous year. Forecasters had called for an increase in the 3.6 to 4 percent range, so many missed a growing confidence on the part of consumers about their current and future financial well-being. In total, Americans spent $691.9 billion during the 2017 holiday season. Non-store sales accounted for $138.4 billion of this total, a year-over-year increase of 11.5 percent as e-commerce continues to take a growing, but still relatively small share, of overall retail sales.

Sales, during the official holiday season beginning November 1 and ending December 31, were up in every retail category except sporting goods, which posted a decline of 0.5 percent unadjusted year-over-year. According to the National Retail Federation, contributing factors to this year’s boost include “unemployment at a 17-year low, a pickup in income, strong consumer confidence and a rising stock market.”

Rolling into 2018, will the momentum continue? If the first unofficial holiday of the year is any indication, signs are positive. Super Bowl Sunday has become a major celebration for not only the host city, but across the country as well. After recording a decline last year, it is expected that sales related to the big game will rebound to $15.3 billion, just shy of the peak in 2016 when sales totaled $15.5 billion.

While the average expenditure is projected at $81.17, the 25 to 34 year old cohort is expected to spend on average $118.43. And what will this money be spent on? Although sales of televisions, party decorations and team apparel make up a portion of the overall spending, food and alcohol are the overwhelming beneficiary of this new American feast day— second only to Thanksgiving. In fact, it is estimated that each person consumes 2,400 calories just during the game! Americans consume 1.25 billion chicken wings, 11.2 million pounds of potato chips, 4 million pizzas and 120 million pounds of avocados  on average each year. And washed down with 50 million cases of beer—enough to fill 169 Olympic swimming pools. And this is about the game or the commercials?

After recovering from this bout of gluttony, and recovering is the right term given the fact that an estimated 16.5 million American workers plan to skip work the following Monday, can the U.S. consumer keep up the pace?

Next up is Valentine’s Day, which also recorded a decline in spending in 2017 after peaking the prior year at $19.7 billion. However, forecasts prepared by Prosper Insights and Analytics call for sales to rebound to $19.6 billion in 2018, suggesting that last year truly was an anomaly. Nearly a quarter of that total, $4.7 billion, will be spent on jewelry, while another $3.7 billion will be spent on an evening out. “Gifts of experience” are popular as well with 24 percent planning to give tickets to a concert, sporting event or other similar event. However, experiences over things continue to be more meaningful to the all-important millennial cohort. Forty-one percent of those between the ages of 25 -34 plan to give this type of gift.

On average, consumers will spend $88.98 ($12.1 billion in total) on their significant other/spouse, $25.29 ($3.5 billion in total) on family members and $7.19 ($982 million in total) on friends. Interesting, or maybe not, is the fact that we will spend more on our pets ($5.50 on average) than our co-workers ($4.79). Again, millennials come through big, expected to spend an average of $202.76 each.

So, what is the American consumer telling us about the economy? With recent volatility in the markets, final spending numbers may not match the forecasts due to impacts on behavior. But, in general, it appears that we’re all feeling pretty good about 2018. Wage increases and the tax-cut related bonuses will more than likely translate into additional spending on consumer goods and services. The Federal Reserve believes the U.S. economy will benefit from the increase in spending, leading to a boost in economic growth. This, in turn, should benefit the commercial real estate markets, further extending the current expansion cycle.