Surprisingly strong holiday spending helps US economy to strong Q4 and points to improved freight environment
The US economy grew at an annualised 3.3% pace in Q4, boosted by record-breaking spending of $964.4 billion over the holiday period and highest ever e-commerce sales
Fears of a slow holiday season for retailers were dispelled when the US recorded its highest level of consumer spending on record, reflecting a strong economic performance in the final half of 2023. The US Census Bureau estimated that 2023’s holiday sales for retail and food services surpassed that of 2022, reaching a total of $964.4 billion, an increase of 3.8%. This was powered by 9% increases in sales of electronics and appliances, and in health and personal care.
Sales growth was even higher in e-commerce. According to Adobe Analytics data compiled from over 1 trillion visits to US retail sites across 18 product categories, a record $222.1 billion was spent online from the period of 1st November to 31st December, a 4.9% increase on the year before.
There was an emphasis on the increased role of ‘Buy Now, Pay Later’ payment methods, which contributed $16.6 billion to the total. Additionally, discounts also hit record highs, particularly in electronics, toys and apparel.
Consumer resilience in the face of inflation and a well-performing labour market led to a bumper year, dissipating previous concerns that the US consumer would finally cut down on purchases.
At the consumer level, confidence rose throughout the holiday period to December, with the Conference Board’s Consumer Confidence Index rising to its highest level since July.
A large part of this has been the surprising all-round economic resilience in the US. GDP in the fourth quarter growth grew at an annualised rate of 3.3% according to the Bureau of Economic Analysis (BEA), following on from 4.9% in Q3. The BEA noted that Q4 expansion, “primarily reflected increases in consumer spending and exports”.
The National Retail Federation’s chief economist Jack Kleinhenz commented on the report, saying, “consumer spending was remarkably resilient throughout 2023 and finished the year with a solid pace for the holiday season”, adding, “although inflation has been the biggest concern for households, the price of goods eased notably and was helped by a healthy labour market”.
This robustness should help the US freight industry to a better performance in 2024 than in 2023.
Capacity in the market is tightening after many firms expanded in the pandemic period, which will help to reduce the supply and demand imbalance.
Alongside the surprising strength of the US economy, there has been destocking by many firms who were overloaded, leading to inventories reducing in the second half of 2023.
ACT research in its January For-Hire Trucking assessment noted a number of metrics improving for the US trucking industry, including fleet productivity and the supply-demand balance, as well as volumes improving from the multi-year lows seen in the first half of 2023.
“With improving goods consumption trends, lower inflation, the end of destocking, and a resilient industrial sector, we expect the gradually improving trend to continue,” the researchers predicted.