State of consumer spending and the holiday dynamics/Labor market cracks/$ at 3 month low

Just a few things that I saw so far with holiday retail sales. Mastercard SpendingPulse said Black Friday was up 2.5% y/o/y, in nominal terms, and that covers both store and online. It was mostly driven by jewelry, apparel, sporting events and restaurants (likely including gift cards). Foot traffic according to RetailNext was higher by 2.1% y/o/y led by health and beauty. Adobe Analytics said they saw sales up 7.5% y/o/y on Black Friday, just looking at online. The National Retail Federation is forecasting overall November and December consumer spending, also in nominal terms, to be up 3-4% y/o/y, including both stores and online.  

Taking advantage of deals was the goal of many consumers and there were certainly discounts and promotions to be had as there always is this time of the year. A key reason for the deals is that we know hearing from countless retailers that consumers are more circumspect with their spend right now. Also, retailers order their holiday inventory many months ago and none want to get stuck with excess inventories. So what is good on the inflation front is also in response to a more 'choiceful' consumer, a word I heard some retailers use and retailers that are trying to keep inventories lean after the excessive inventories they built up after last year's holidays. 

I read in the weekend WSJ that "JCPenney rolled back prices on hundreds of items, with some costing the same as they did in 2019, said CEO Marc Rosen." The CEO of Walmart's US business, according to the same WSJ piece, said "Prices on some nonfood items are lower than last year as inflation cools, which has helped spur interest in items such as $4 bath towels and toys under $25."

The key question for inflation in 2024 and the years beyond is the fine line that the Fed is trying to dance around here by doing their best to temper demand for things but at the same time they are crushing the supply capacity of the US economy via higher interest rates, which itself will lead to another rise in inflation in the coming years. For example, countless trucking companies are going out of business, with Yellow being the highest profile. That will eventually lead to a firming in transportation prices. There is very little brand new multi family construction going on as a large existing amount gets finished. That will eventually lead to a resumption of rental price gains after 2024-2025.