Discretionary spending goes flat after holiday fizzle: Circana

Discretionary spending is moderating again as consumers pull back after the holidays, according to a new report from Circana.

Discretionary spending jumped 9% in the five-week holiday shopping season running from Black Friday to January 4. There was also a 1% bump in spending on discretionary general merchandise, despite some experts predicting that consumers would prioritize experiences over goods. Relatedly, sales of non-edible consumer packaged goods increased 2% in dollars and 1% in unit sales.

Marshal Cohen, chief retail industry advisor for Circana, said in a statement that a resilient consumer helped make up for the shorter holiday season and uncertainty around the US presidential election, resulting in “moderate growth anticipated at the season’s start.”

However, pre-holiday trends snapped back into place this month, with discretionary spending coming in flat for the weeks ending January 11 and 18.

Cohen called this a “post-holiday spending respite,” noting that shoppers are still dealing with higher prices on non-discretionary items. They are also contending with external factors such as extreme cold and wildfires, and going ahead, he warned that retailers will need to do extra work to get consumers’ attention.

“The consumer resiliency demonstrated by Holiday 2024 and the year’s overall retail results are a good sign for retail, but marketers need to be prepared for inevitable distractions that will impact the types of products purchased and the timing of spending as consumers continue to prioritize purchases around immediate need,” he said.

As Deloitte highlighted in a recent study, its measure for discretionary spending intentions is improving, but it is still down 13.6% from 2021. The research group also noted that the comedown from a high-inflation period can take up to two years, which may be what is playing out right in the US economy.