It would seem that consumers are feeling the holiday cheer this year, celebrating an end to lockdowns and the muted festivities of last year. On Wednesday, December 21st, the Conference Board released a survey that showed an increase in the consumer confidence index, which beat economists’ estimates. This was good news for the stock market, which saw a composite rally of 1.5% in the Nasdaq and S&P 500, as the index had declined in both October and November.
As consumer confidence has risen, so has consumer spending.
As inflation has taken its toll on the economy, consumer spending has seen a steady decline. From a high of 12.1% in Q2 of 2021, Personal Consumer Expenditures (PCE) dropped to 1.3% in Q1 of 2022. Q2 and Q3 reversed this trend increasing to 1.7% and 2.3%, respectively. With consumer confidence high, we may see an even higher number in Q4.
The holiday season isn’t the only thing consumers have to feel cheery about right now, either.
The labor market remains strong, with the unemployment rate staying at around 3.7%. Initial unemployment claims also remain low, increasing by only 2,000 in the week ending DEC/17. Even with the FED aggressively hiking up rates, the labor market has persisted. New jobs have been consistently added each month, many times beating expectations. Though this may also be due to a lag in the effects of increased interest rates.
Even with consumers feeling jubilant this holiday season, that is not to say they haven’t felt the effects of inflation. A certain Christmas tradition is a bit more pricey this season.
Due to inflation, high demand, and droughts, Christmas tree growers across the country are expecting to increase prices. In a survey conducted by the Real Christmas Tree Board, they found that 71% of wholesalers who provide two-thirds of the nation’s trees are expecting to raise prices by 5-20% compared to last year. When the data is released, we expect it to reflect this, with prices falling within a +/-$10 range of the 2022 average of the chart above.
Even with prices for Christmas trees higher this year, it remains essential for anyone looking to celebrate the holiday, and it seems there are more Bob Crachetts than Ebenezer Scrooges.