Christmas Cash: December Spending Highest in Four Years

Americans were in a generous mood when it came to purchasing this past December, as they reported spending an average $83 per day in stores, online and in restaurants, excluding household bills and a home or car purchase. That is up from $73 in November and the highest monthly figure Gallup has reported since December 2008. It is also the first reading above the $80 mark since the 2008-2009 recession.

The December data are based on Gallup Daily tracking interviews with more than 13,000 U.S. adults conducted throughout the month.

In each of the last four years, December was the single month with the highest spending average, which is not surprising given the tradition of giving and receiving holiday gifts. The December averages are typically about $10 higher than the average of the prior 11 months combined.

The four-year high in spending in December 2012 follows the trend toward increased spending Gallup has observed over the last four years. As the accompanying table shows, both the January through November and December averages have increased each year since 2009.

Spending Up Among Higher- and Lower-Income Americans

Typically, when Gallup finds variation in month-to-month spending, it is because of changes among the highest income Americans, those whose annual household incomes exceed $90,000. Americans below that income threshold have a more stable level of spending.

However, in December, self-reported spending increased among both income groups. The monthly average reported daily spending of $155 for higher-income Americans and $67 for lower-income Americans is the highest for each in at least four years.

Thus, the increase in spending in December was broad-based, with people of varying economic resources spending at least a bit more than they have in recent memory.

Implications

The increase in Americans' reported spending is clearly a positive sign for the U.S. economy, which is heavily dependent on consumer spending to drive economic growth. Indeed, many retail stores reported strong sales in December after a slower start to the holiday season. And the 2012 holiday season proved to be a strong one for online retailers, something that Gallup's spending estimates would pick up but reports of sales at retail stores would not.

Whether the trend toward greater spending continues in 2013 is unclear. Most Americans are seeing a decrease in take-home pay with the expiration of the Social Security payroll tax holiday, but President Barack Obama's and Congress' efforts to avoid the fiscal cliff kept federal income tax rates the same for most Americans.

Whereas December is usually the strongest month for consumer spending, January is typically one of the weakest, so it is unlikely spending will remain at the higher level reached in December. One key to understanding the trend in consumer spending will be how January 2013 spending compares with prior Januaries. If January 2013 looks strong compared with prior Januaries, it is a sign that the economic momentum is continuing. If it is weaker, it could be a sign that Americans' more generous spending ways may be ending.

Source: Gallup

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