For many Americans, the end of the year is a time for parties, family gatherings, festive meals and, of course, shopping. And all that celebrating makes the fourth quarter the most important time of the year for the U.S. economy.
Looking at the past three decades of monthly retail spending data, when not adjusted for seasonality, December of each year is easy to spot.
When this pattern breaks, something has gone awry. In the midst of the Great Recession, people cut back on nonessential holiday spending, and end-of-the-year purchases took a significant hit, as you see when you compare spending before 2010 on the chart below to spending in 2020.
In 2020, despite the economic crisis caused by the pandemic, December spending increased from the year before. Many Americans had extra cash to spend thanks to government stimulus payments, and holiday spending was a large part of how they chose to use it, contributing to the economic recovery.
This seasonal trend is robust enough that it’s visible in our economy beyond just end-of-the-year retail shopping and food.
The last quarter of the year nearly always produces more than each of the first three when it comes to gross domestic product. Americans’ ability to spend their way through the darkest months of the year is a key component in the health of the economy.
As Black Friday results roll in and the last few weeks of 2023 approach, economists will be keenly attuned to what consumers are doing. Michelle Meyer, a chief economist at Mastercard, said this was likely to be “a promotion-driven holiday season,” in which shoppers will patiently wait for the best deals.
But Meyer is still expecting consumers to be “quite active” this year, increasing their holiday spending over last year. In an effort to curb inflation, the Federal Reserve has been raising interest rates over the past 20 months, and experts have been on the lookout for a recession. But for now, there’s hope for an economically festive holiday season.
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