Macroeconomic Overview: With the passing of the Thanksgiving holiday, the holiday sales period has shifted into a higher gear. Traditionally, much attention has been focused on "Black Friday", that day after Thanksgiving, which has commonly been the busiest shopping day for many retailers. However, the retail environment has shifted in recent years, with increasing proportions of sales being conducted on-line rather than in brick-and-mortar stores. This has diminished the significance of Black Friday as a bellwether for the holiday shopping season and made "Cyber Monday", the Monday following Thanksgiving when many on-line retailers offer discounts similar to those offered in brick-and-mortar stores on Black Friday, increasingly important.
Spending growth throughout the holiday season is expected to be supported by the continued strength in the labor market, a high level of consumer confidence, wealth effects associated with the series of record highs set in U.S. stock markets, and a reduction in the savings rate. Early reports regarding sales over the post-Thanksgiving weekend have been positive, for both brick and mortar and on-line retailers. Adobe Digital Insights, which tracks nearly 80% of on-line transactions at the largest on-line retailers found that on-line spending increased more than 10% year-over-year on Thanksgiving weekend and that sales on Cyber Monday were up 16.8% year-over-year, marking the largest day for U.S. on-line shopping ever ($6.6 billion, for international comparison highlighting the importance of e-commerce in China, sales on China's Singles Day were over $25 billion this year).
In a further evolution of shopping trends, data indicate that an increasing proportion of on-line transactions are occurring on mobile devices. Mobile sales represented nearly half on on-line visits to store websites on Cyber Monday and nearly one third of transaction revenue. Growth in retailer revenue coming from smartphones was up nearly 40% compared to last year. It is unknown how much of these transactions were completed in-store, but many retailers are set up to support in-store spending on mobile devices, which blurs the distinction between sales driven by brick and mortar locations versus those on-line.
or retailers, a persistent central theme for the holiday season is inventory management. If a retailer mismatches order volumes with consumer demand, the retailer either misses out on potential sales or ends up having to discount. Trade data suggest that apparel retailers have been careful with order placement this year. In terms of square-meter equivalence (SME), apparel imports of all fibers are up only 1.0% versus a year ago through the first ten months of the year. For context, the U.S. population grew about one percent over the past year (+0.7%, from 324.2 to 326.4 million), indicating that economic growth has not stimulated per capita order placement.
Employment: The U.S. economy is estimated to have added 228,000 jobs in October. Revisions to estimates to previous months were mixed, with the figure for September rising from +18,000 to +38,000 and the figure for December dropping from +261,000 to +244,000. The net effect of these updates was to indicate that hiring was slightly higher over the past couple months than previously believed (+3,000 jobs). Average job growth throughout 2017 has been 174,000. Over the same time period in 2016, average job growth was 190,000.
Consumer Confidence & Spending: The Conference Board's Index of Consumer Confidence increased for the fifth consecutive month in November. The current reading is 129.5, which ranks among the highest values since the early 2000s and among the highest values ever recorded.
espite high confidence readings, consumer spending increased only 0.1% month-over-month in the latest seasonally-adjusted data for October. Year-over-year, total consumer spending was up 2.6%. Apparel spending was up 0.5% month-over-month and up 1.9% year-over-year.
Consumer Prices & Import Data: Retail apparel prices were nearly unchanged both month-over-month (+0.01%) and year-over-year (-0.1%) in the latest seasonally-adjusted data (October). Average prices per square meter equivalent of apparel imported increased month-over-month (+0.7%) and year-over-year (+3.5%) in the latest seasonally-adjusted data (October). Sourcing costs for cotton-dominant apparel imports have been drifting higher since early 2017, which has been coincident with weakening of dollar against a broad range of currencies (USD down 7% in Federal Reserve's Broad Dollar Index since January 2017).