November 4, 2020 — The holiday season is once again upon us and this year the ongoing COVID pandemic will create some challenges for both consumers and merchants. Recent data on the economic health of U.S. consumers has been mixed, with a slower pace of recovery in the labor market, lower wage and salary income relative to last year, and continued elevated jobless claims. Conversely, consumers’ confidence in future economic conditions and income growth are both improving. Such mixed messages make this year’s holiday sales forecast particularly difficult.
U.S. holiday spending* is likely to grow 7.8 percent year-over-year (YoY) on all forms of payment, according to Visa Business and Economic Insights.** This forecast represents an acceleration from the 4 percent gain in 2019 and, if realized, would represent the strongest pace of holiday sales since 1999. Among the key drivers of this year’s robust holiday sales are the recent surge in e-commerce sales, the continued robust demand for food and beverages at home (groceries), and higher prices on holiday-related items. While this holiday shopping season is expected to be better than last year’s, there are also risks to be aware of; namely, a surge in virus cases that could result in another widespread shutdown of the economy. In addition, the ongoing pandemic and end of stimulus programs may make consumers even more cautious, and thus slow spending. Absent these negative factors, the U.S. consumer should have a very merry end to what has been a very rough 2020.