Rising interest rates may not slow down holiday shoppers this year
Rising interest rates may not slow down holiday shoppers this year

Rising interest rates may not slow down holiday shoppers this year

As the Federal Reserve raises interest rates to reduce inflation, it can be expected that holiday shopping in the United States will be quieter than in previous years.

But according to analysts, factors such as low unemployment and the possibility of major price cuts mean the holiday season is shaping up to be another busy one.

In a sign of the uncertainty U.S. retailers are currently facing, major rivals Walmart and Target announced two very different holiday job targets this week. While Walmart is now targeting 40,000 new, mostly seasonal workers — down from 150,000 last year — Target is looking to bring on another 100,000 workers this holiday season. That’s the same chart she set last year.

Uncertainty is further reflected in holiday spending forecasts. US consulting firm Deloitte now expects overall holiday sales to rise 4% to 6% this year compared to growth of 15.1% last winter. But it also expects e-commerce sales to rise 12.8% to 14.3% compared to 8.4% last year as consumers hunt for deals online.

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Retailers continue to see more inventory, according to Ted Rossman, senior industry analyst at Bankrate.com — the result of improved supply chains, changing costs of services and experiences, and generally lower demand.

It is also evidenced by inflation data, which shows the price of traditional gifts such as furniture and clothing, as well as electronic goods such as TVs and stereos, have often risen more slowly than the general price level. swelling.

Walmart previously announced that more than half of the toys on its annual Top Toy list will retail for less than $50, with many under $25.

Thanks to a still-healthy job market that helps people feel more secure about their finances, the holiday season is shaping up to be “the best buyer’s market in years,” Rossman said.

The impact of the Fed

On Wednesday, the Federal Reserve raised the key interest rate to 0.75% as it seeks to control inflation levels not seen in four decades.

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The goal is to control the growing demand after the epidemic, slowing down the economy and putting downward pressure on prices.

In the short term, it means higher borrowing costs. Meanwhile, the average mortgage rate is now well above 6%, the highest since at least 2008.

For consumers who plan to use a credit card to make purchases, the average APR rate is now at its highest level since 1995, at about 18%, according to Bankrate.com, and close to a record 19%.

But Rossman said there is usually a delay of one or two months before credit card interest rates are raised after the Fed hike takes effect. In addition, many individuals who already have credit card debt are often willing to take on more, he said.

“There’s a little bit of negativity, or mental calculation, if you’ve already had a loan,” he said.

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Overall, Rossman said, household balance sheets remain healthy heading into the holiday season. It is something that he said helps to “debunk” the current consumer sentiment reading which is always falling amid inflationary concerns.

He said he doesn’t expect credit card delinquencies to rise amid higher APR rates.

“People still have a lot of money in the bank,” he said. “They paid off debt, and while there are certainly warning signs coming, many people are still starting from a strong position.”

It’s a sentiment echoed in Bank of America’s Consumer Education report, which found that at the moment, consumers continue to feel “chipper.”

“Consumers continue to show strong economic growth,” BofA said. “They have benefited recently from the drop in oil prices and continue to experience a strong labor market.”

Source : www.nbcnews.com