The Spin of Holiday Spending and Math

Well the fever over the holidays is now in our rearview mirror. And from all accounts it appears that holiday shoppers were in the mood to spend money this year.

According to a report by MasterCard SpendingPulse, they found that since Novermber 5th, spending was up more than 5 percent from the same time last year - the best showing since 2005, well before the recession. It went to say that there had been sizable increases in spending on apparel, jewelry and luxury items over the holiday shopping season.

I guess those ads touting luxury cars and big presents were effective after all.

I happen to think that basic math is playing a role here – yet again.

According to Gallup, “An upper-income spending splurge led the way to strong self-reported spending during Christmas week 2010. Upper-income Americans’ self-reported consumer spending in stores, restaurants, gas stations, and online averaged $183 per day during the week ending Dec. 26 — up from $126 during the same week in 2009.”

The number is an extraordinary 45% improvement.

“Americans’ overall self-reported spending surged to an average of $85 per day during the week ending Dec. 26 — up from $77 during the prior week and $66 during the first two weeks of December. As a result, spending during Christmas week 2010 exceeded that of 2009 and 2008.”

None of the information in the Gallup data allows for a forecast of whether this aggressive consumer spending will last into next year. It is possible that many of the expenditures were made on credit. This could mean that folks in this income-level group are re-leveraging themselves. They are less reliant on the housing market and more sensitive to the investment market and Wall Street did pretty well last year.

We still have 9.8% unemployment and housing prices look wobbly again. Gas prices are on the rise and I doubt that the extra money in our paychecks will be enough to offset rising fuel prices. It still seems to me from afar that lenders are being extra cautious on lending – who can blame them since they don’t really know what to expect from the regulators this year – but that doesn’t help the consumer and ultimately their ability / willingness to spend.

So let’s keep watching the numbers and doing the math.