Will generosity make or break the upcoming holiday season?

Published: October 23, 2023 by Gary Stockton

Fall 2023 Beyond the Trends report out now

As we delve into the latter part of 2023, it’s evident that the market is undergoing significant shifts, a few of which we touch on in this post. Be sure to download your copy of the latest Beyond the Trends report. We’ll summarize a few of the highlights that stood out to us as the aisles of holiday merchandise drop into shopping carts, and the holiday season kicks off across the country.

A word from the report’s author:

Holiday Shopping: A Season of Hope Amidst Economic Challenges

The holiday season is always a crucial period for retailers, and this year is no exception. U.S. spending trends have shown a positive trajectory in the last two months of the quarter, indicating a potential surge in holiday shopping. Retailers are expecting a sales increase of 3.5% to 4.6%, amounting to a whopping $1.54 to $1.56 trillion. This optimism is further bolstered by the fact that consumers have been consistently spending, despite challenges like high interest rates and rising debt payments. However, it’s not all rosy. Factors such as inflation, high gasoline and food prices, and costlier apparel are anticipated to dampen consumer spending.

Factory Orders: A Cooling Trend

Businesses, wary of an impending recession, have reduced their ordering and are relying more on their current stocks, especially for the holiday season. This trend has a cascading effect on related industries. For instance, the reduced need for warehouse space due to lower restocking and new orders has impacted the commercial construction sector. Furthermore, if consumers are buying fewer items due to high pricing, it means fewer units need to be shipped, directly affecting the transportation industry. Logistic costs have been on a decline for the past year, impacting both major trucking companies and independent transporters.

Inventory: A Strategic Approach Amidst Uncertainty

With the looming threat of a recession, businesses are taking a more strategic approach to their inventory. The trend indicates a reliance on current stocks rather than placing new orders. This cautious approach reflects the broader economic sentiment. Retailers, in particular, are keenly observing consumer behaviors and making forecasts on how many items to stock in their shopping carts for the holiday season.

Credit Markets Tightening: A Sign of Caution

There’s a discernible focus on the tightening of credit markets. Consumer and commercial credit scores are witnessing the repercussions of increased leveraging and slower repayment behaviors.
This tightening could potentially lead to a downsized holiday shopping list for many. For small businesses, this could translate to reduced consumer spending power, affecting their cashflows. Businesses that have been thriving in a bullish market might need to reconsider their strategies, especially as they might face challenges accessing credit markets or private funding in a cooling market.

The Senior Loan Officer Opinion survey further underscores this trend, highlighting a growing inclination among lenders to tighten lending criteria.

In closing:

As we approach the end of 2023, the market is in a state of flux. While the holiday season brings hope for retailers, the broader economic indicators suggest caution. Businesses are strategizing to navigate these uncertain times, and the decisions they make now will have long-term implications. As consumers, businesses, and policymakers grapple with these challenges, one thing is clear: adaptability and resilience will be the keys to thriving in this ever-evolving landscape.

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The latest insight, tips, and trends on all things related to commercial risk by the team at Experian Business Information Services. Please follow us on social media.

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