Holiday Retail Sales Rise 3.8% Despite Economic Headwinds

Holiday retail sales in the U.S. rose 3.8% year-over-year during the 2024 holiday season, according to Mastercard SpendingPulse, which tracks all kinds of payments including cash and debit cards. This increase outpaced the 3.1% growth from the previous year, despite economic headwinds such as elevated prices for many groceries and other necessities.

The holiday season, from the beginning of November through Christmas Eve, saw a significant shift in consumer behavior, with online sales jumping 6.7% from a year ago and in-person spending rising 2.9%. This trend was particularly evident during the biggest promotional periods, such as Black Friday and Cyber Monday, when consumers sought value and concentrated their spending online.

Michelle Meyer, chief economist at the Mastercard Economics Institute, noted that the holiday shopping season "revealed a consumer who is willing and able to spend but driven by a search for value," as seen by the concentrated online spending during these promotional periods. This shift in consumer behavior allowed retailers to cater to the demand for deals and promotions, ultimately driving the overall increase in holiday retail sales.

The growth of e-commerce continued to dominate the retail landscape, with certain cities emerging as leaders in online shopping. Tampa, Florida, and Phoenix saw double-digit growth of 10.6% and 10%, respectively, while other metropolitan areas such as Minneapolis (8.9%), Dallas (8.4%), and Charlotte, North Carolina (7.9%), also showcased a strong preference for online shopping.

Despite the shorter holiday shopping period between Thanksgiving and Christmas, with five fewer days, retailers successfully adapted their promotional strategies to encourage shoppers to buy early and in bulk. This was evident in the 3.8% increase in holiday sales, which outpaced the previous year's growth. Retailers offered deals during the biggest promotional periods to meet the demand of value-minded consumers, with the last five days of the season accounting for 10% of total retail spending.

The presidential election in 2024 also captured consumers' attention and influenced their spending decisions. Retailers felt more pressure this year due to the shorter holiday shopping period and the distraction of the election. Sales of general merchandise slid 9% in the two weeks ended Nov. 9, according to Circana, a market research group. However, sales have been rebounding since then, indicating that retailers are working to make up for those losses.

In conclusion, the 3.8% increase in holiday retail sales demonstrates the resilience of the U.S. consumer and the adaptability of retailers in the face of economic headwinds and a compressed holiday shopping season. The shift in consumer behavior towards online shopping, particularly during peak promotional periods, contributed significantly to the overall increase in holiday retail sales. As the retail landscape continues to evolve, investors should keep an eye on the trends shaping consumer spending and the strategies retailers employ to meet their demands.