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Early Holiday Shopping Trends Amidst the Burden of Student Loan Payments

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Early Holiday Shopping Trends and the Impact of Student Loan Payments

Shifting Shopping Patterns and Retail Sales Forecast

This year, a significant number of shoppers are planning to kick off their holiday shopping earlier than ever before. According to a Bankrate report, half of shoppers intend to begin their holiday shopping by Halloween. Additionally, a study by RetailMeNot found that as many as 64% of shoppers are starting the season in October, up from 53% in 2022. This early start to holiday shopping is expected to drive an increase in holiday retail sales between 3.5% and 4.6% in 2023, as projected by Deloitte's annual forecast. Daniel Bachman, Deloitte's U.S. economic forecaster, attributes this growth to healthy employment and income growth.

The Splurging Trend and Signs of a Shifting Economy

Despite the assumption that early shoppers are motivated by sales and the desire to spread out holiday expenses, research from Morning Consult suggests that early shoppers are actually splurging rather than saving. Consumers have displayed remarkable resilience thus far, but there are indications of a shift in spending patterns. While shoppers are still purchasing more than the previous year, the rate of spending growth is slowing as the economy stabilizes, according to the National Retail Federation (NRF). NRF President and CEO Matthew Shay expects moderate growth to continue, but acknowledges uncertainties such as inflation, interest rates, and the possibility of a government shutdown. Jack Kleinhenz, the NRF's chief economist, attributes the slowing momentum to lower pandemic savings and rising credit costs.

Student Loan Payments as a Drag on Consumer Spending

The burden of student loan payments is another factor impacting consumer spending. Brett House, professor of professional practice in economics at Columbia Business School, highlights the constraints imposed on household budgets by higher interest rates. While inflation has shown some signs of cooling, it remains above the Federal Reserve's 2% target, leaving room for potential interest rate increases. On a positive note, labor markets remain strong, with a slightly higher unemployment rate of 3.8% compared to the previous year. Although job openings have decreased, high participation rates indicate near-full employment.

Anxiety Surrounding the End of Payment Pause and Budgetary Adjustments

A recent survey by the National Endowment for Financial Education (NEFE) reveals that roughly half of borrowers are concerned about the negative impact of the end of the payment pause on their lives. As borrowers approach October with anxiety, most will need to make budgetary changes. Billy Hensley, NEFE's president and CEO, notes that one in four U.S. adults will be reducing their spending in other areas, potentially causing a shift in consumer spending patterns that could reverberate throughout the entire economy. In conclusion, early holiday shopping trends indicate a shift in consumer behavior, with shoppers starting their holiday shopping earlier than ever before. However, the impact of student loan payments on consumer spending poses challenges. As borrowers prepare for the end of the payment pause, concerns and budgetary adjustments are likely to influence overall spending patterns.

The Influence of Early Holiday Shopping and Student Loan Payments on New Businesses

Early Shopping Trends and the Potential Impact on New Businesses

The current year has seen a significant shift in shopping patterns, with many consumers starting their holiday shopping earlier than usual. Reports suggest that half of shoppers plan to commence their holiday shopping by Halloween. This trend is expected to boost holiday retail sales between 3.5% and 4.6% in 2023. For new businesses, this could mean a need to adjust their marketing and sales strategies to cater to these early shoppers.

Consumer Spending and Economic Shifts

Interestingly, early shoppers are not necessarily looking to save; instead, they are splurging. This consumer behavior, coupled with a slowing rate of spending growth, could impact new businesses. They may need to navigate uncertainties like inflation and potential interest rate hikes while planning their financial strategies. Moreover, the possibility of a government shutdown could add another layer of complexity.

Student Loan Payments: A Challenge for Consumer Spending

The burden of student loan payments is another significant factor affecting consumer spending. Higher interest rates are constraining household budgets, and the end of the payment pause is causing anxiety among borrowers. This financial stress could lead to a decrease in discretionary spending, which new businesses need to consider when forecasting sales and growth.

Adjustments and Their Impact on the Economy

As borrowers prepare for the resumption of loan payments, many will have to make budgetary changes. The potential reduction in spending could cause a ripple effect in consumer spending patterns, affecting the entire economy. New businesses need to be aware of these trends and adjust their strategies accordingly to ensure sustainability and growth in a changing economic landscape.
Story First Published at: https://www.cnbc.com/2023/09/28/holiday-shoppers-get-an-early-start-but-student-loan-payments-loom.html
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