The holiday buying season is upon us! While strong sales are expected to boost the economy, Creighton University economics professor Ernie Goss, Ph.D., expects that consumers will see higher prices, fewer bargains and a lack of in-demand products. Goss said this is due to supply chain disruptions, worker shortages and soaring inflationary pressures that will impact shoppers.
Goss, a Lukas Partners client, produces two monthly economic surveys at Creighton — the Mid-America Business Conditions Index of manufacturing supply managers in nine states and the Rural Mainstreet Index of financial institution CEOs in rural areas of 10 states. Based on survey economic indicators, he has identified the following trends that will impact the economy over the holiday season:
Strong retail growth, but high inflation due to supply chain bottlenecks – Stores within the Mid-America and Rural Mainstreet regions are expected to see strong sales this season, with growth increasing up to 10% from last year. Unfortunately for retailers, approximately 5% of the increase in net sales is due to inflation caused by supply chain bottlenecks and labor shortages. These supply chain bottleneck disruptions are related to transportation delays and truck driver shortages.
Hiring headaches impact the shopping experience – The second-most important factor restraining the U.S. economy is a hiring shortage. As a result, shoppers can expect to encounter longer checkout lines and less customer service assistance.
More consumers will shop in-store instead of online – While online shopping increased last year due to the COVID-19 pandemic, many consumers will shop in-store to avoid transportation delays that could cause their holiday gifts to arrive late. Consumers also are more likely to shop local than previous seasons because of rising fuel prices. However, with many business closures, shoppers will have fewer retail options, particularly outside of metropolitan areas.
Less bargains and empty shelves ‒ Consumers will see fewer deals this holiday shopping season due to hiring shortages, supply chain disruptions and surging inflation rates. Consumers who shop earlier will be more likely to encounter deals than last-minute shoppers.
More cash to spend – With two federal stimulus programs and an unprecedented Federal Reserve expansion, consumers will likely increase their cash-to-credit ratio this holiday shopping season. This results from shoppers having a significantly larger cash cushion than in 2020.
Holiday travel – With less travel restrictions this year, individual and family travel is expected to increase. More people will drive to their destination instead of fly due to fears of flight delays and cancellations across the country because of current hiring shortages. Business travel will remain weak.
For more economic insights from Goss, visit https://www.creighton.edu/economicoutlook/.