U.S. consumer recovery is losing some momentum

Holiday sales were strong, but consumers have slowed spending due to expired federal stimulus programs and continued surges in COVID cases.

January 27, 2021 – Holiday sales* rose 8.5 percent over last year’s level. Holiday spending is heavily weighted towards goods and also includes e-commerce, both of which drove the gains. Non-store or e-commerce sales slipped in both November and December but remained up 21.3 percent year-over-year (YoY). Among the strongest holiday categories were sporting goods and book stores (+14.9 percent) and grocery and liquor stores (+9.6 percent). Disposable income growth slowed to 4.3 percent YoY in November as stimulus effects began to wane. Government social benefits, which capture unemployment insurance benefits, fell 3.3 percent month-over-month as many individuals began to exhaust their benefits. The recovery in consumer spending remained unequal across spending categories—goods purchases were up 6.9 percent YoY versus services spending, which was down 4.9 percent from a year ago.

Consumer price growth rose 1.4 percent YoY, signifying an acceleration of inflation. Prices for both new and used vehicles increased in December with strong consumer demand. The used car market is especially strong, pushing prices up 10 percent from last year. The Consumer Confidence Index decreased to 88.6 in December, with a precipitous decline of 15.6 points in the present situation component leading the drop in the index. In December, the U.S. economy lost jobs for the first time since the start of the recovery last May, losing 140,000 jobs concentrated primarily in leisure and hospitality (-498,000) and government (-45,000).

“Holiday sales were strong this year, but the more goods-centric definition of holiday sales and higher prices mostly drove that strong showing,” said Michael Brown, Principal U.S. Economist. “Services spending, which typically accounts for the bulk of consumer spending, remains well below pre-recession levels.”

“Job growth decelerated each month since June, indicating a tenuous recovery that is relying on external stimulus for support," said Jeffrey Roach, Senior U.S. Economist. “Most concerning is the elevated number of workers who are long-term unemployed, since job skills will diminish during periods without work.”

Highlights:

  • Holiday sales rise 8.5 percent, most on record
  • More consumers say business conditions will improve in the next six months
  • COVID lockdowns in December produce first decline in jobs since April

Retail sales excluding auto sales (YoY percent change)

Bar chart showing the year-over-year percent change in holiday sales. See image description.

Bar chart showing the YoY percent change in holiday sales ranging from 4.7% in 2010, to 5.1% in 2014, 6.2% in 2017, 2.4% in 2018, and reaching a high of 8.5% in 2020.

*We define holiday sales as retail sales on all forms of payment less sales at automotive dealers, gas stations and restaurants for the months of November and December.

Sources: Visa Business and Economic Insights and U.S. Department of Commerce.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are generally identified by words such as “outlook,” “forecast,” “projected,” “could,” “expects,” “will” and other similar expressions. Examples of such forward-looking statements include, but are not limited to, statements we make about Visa’s business, economic outlooks, population expansion and analyses.  All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our filings with the U.S. Securities and Exchange Commission (SEC). Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise.

Disclaimer

Studies, survey results, research, recommendations, opportunity assessments, claims, etc. (the ‘Statements’) should be considered directional only. The Statements should not be relied upon for marketing, legal, regulatory or other advice. The Statements should be independently evaluated in light of your specific business needs and any applicable laws and regulations. Visa is not responsible for your use of the Statements, including errors of any kind, or any assumptions or conclusions you might draw from their use.