Cyberweek Was Solid
During the five-day period from Thanksgiving to Cyber Monday, shopping choices and discounts abounded. Cyber Monday discounts inundated anyone with an email account. According to Mastercard data, total retail sales increased 3.4% compared to the prior year on Black Friday, with in-store sales up only 0.7% but with online sales up nearly 15%. Jewelry, electronics and apparel were among the standout purchases. Amazon#’ noted that its “Black Friday deals” lasted nearly a week and resulted in record sales. Data from Adobe# found that consumers shopping online showed a greater willingness to indulge in pricier purchases. Cyber Monday was a day for splurge purchases, with luxury handbags and apparel categories seeing very strong growth. As a counter trend, higher-income shoppers have also traded down, increasingly turning to discount retailers like Walmart# and Costco#.
Mixed Spending Trends, But More Mobile Buying
General healthy spending by consumers is impacting companies unequally, however. For example, American Eagle noted weaker than expected demand yesterday while Five Below saw its sales rebound higher. Foot Locker highlighted weaker consumer trends and an elevated promotional environment, and the stock dropped 11% after slashing fiscal-year guidance. Chewy, the pet-goods retailer, fell about 8% after reporting third-quarter earnings below expectations. Meanwhile, sales trends at Dick’s Sporting Goods appear to be on solid footing.
Mobile commerce overtook desktop-based purchasing for online shopping. It has become easier to price compare and purchase on our phones, even from within the store where we are shopping. Some of us remember getting catalogs in the mail and waiting in long lines at the mall. No more. Adobe’s Cyberweek data showed that mobile traffic drove 53% of online sales, up from 33% in 2019.
Payment methods continue to evolve as well. PayPal had about 11% share of checkouts in 2024, down from 13% in 2023, and a continuation of a declining trend over recent years. PayPal’s overall usage, however, grew by about 1% this year after declining 5% last year during Cyberweek. Enlisting actor Will Ferrell as a spokesperson may have moved the needle, but only slightly. Meanwhile, “Wallet Pay” (mostly Apple Pay) grew by 39% over the prior year. The much hyped “Buy Now Pay Later” (BNPL) trend expanded its share of online payments only modestly. BNPL share of online sales grew to 7.7%, up only 0.2% from last year.
Manufacturing Activity Remains Slow But Steady
Even considering all of this consumer spending activity, manufacturing in the U.S. still contracted for an eighth-straight month in November, perhaps due to elevated inventories. The Institute for Supply Management said Monday that its purchasing managers’ index of manufacturing activity was 48.4 in November, up from 46.5 in October, but still below expansionary territory. Demand remained relatively weak in November as companies prepare plans for 2025 with the benefit of the election cycle being over, but with backlogs weak. On a positive note, the index’s gauge of new orders returned to growth after seven months of contraction, while employment recovered. Inventory destocking was noted in the report as businesses gauge near-term demand trends. The Federal Reserve’s latest Beige Book survey suggested that economic activity increased slightly in November after little change in preceding months. That survey suggests that US businesses grew more upbeat about demand prospects, so we are getting some conflicting signals. Expectations for growth rose “moderately” across most geographies and sectors, according to the report.
Banks that issue credit cards have actually been raising interest rates and some recently introduced new fees in response to impending regulation. The effect is that proposed regulation intended to save consumers money has instead resulted in higher costs for some. The higher interest rates kick in for new loans, meaning the impact to consumers will rise in coming months as they accumulate fresh debts to fund holiday spending. Americans currently owe a record $1.2 trillion on their credit cards, 8.1% higher than a year ago, according to the Federal Reserve Bank of NY. Rising credit card delinquencies bear watching for signs of consumer stress.
Markets March Higher
Amidst this holiday season, stock markets continue to march higher, hitting new records this week.
The Dow Jones Industrial Average passed the 45,000 mark, up 19% year to date. The S&P 500 has risen over 27% and small cap stocks have gained about 20%. Looking ahead, U.S. GDP growth is forecast to exceed 3% in the fourth quarter. Plus, the 10-year Treasury yield has backed off to about 4.2% from 4.5% and corporate earnings have been generally positive versus expectations, despite some notable misses. Markets are currently pricing in a more than 75% probability of another 25-basis point rate cut at the December FOMC meeting. The sailor in the Rime of the Ancient Mariner had an albatross hung around his neck. While there may be some rough seas ahead related to potential tariffs, inflation and the pace of economic growth, markets and consumers are dealing with the albatross of inflation and higher rates that had been weighing investors down. With all of this shopping activity, it is a good thing that Cyber Monday was followed by Giving Tuesday.
Former Raiders quarterback Jim Plunkett turns 77 today, and actor Frankie Muniz turns 39. Of note, Walt Disney was also born on this day in 1901.
Christopher Crooks, CFA®, CFP® 610-260-2219