Skip to content

‘Tis The Spending Season

American consumers are becoming more frugal this holiday season.

Many cities roll out beautiful decorations at this time of year, but no one does the holidays like New York.  I started the week visiting clients there, and the walks between meetings took me past a number of gorgeous window displays. Creative and colorful, they are a magnet that lures shoppers to Midtown.

Retailers will need all the energy they can generate during the coming month.  After two very strong holiday seasons, 2023 is likely to be softer; sales gains are expected to be about 3% this year, as compared to 5.7% last year and almost 13% in 2021. A series of forces are at play:

  • Household finances are not as strong.  Among the bottom half of the income distribution, excess savings accumulated during the pandemic have dissipated, and the use of credit has increased.
  •  As we discussed recently, the American labor market is still strong, but showing signs of softening.
  • While confidence surveys don’t always track with spending behavior, levels of consumer confidence in the United States remain depressed.
  • Spending is still favoring services over goods, by some margin.


American consumers have had a great run.  They are the primary reason why the U.S. economy has outperformed so consistently in the last year.  But their means have become more limited, and their purchasing has become more frugal.  We can see this in retail profit margins, surveys of pricing power and mentions in earnings calls.  Anticipating this, merchants held Black Friday events weeks before Black Friday itself. 

These promotions illustrate the difficulty in defining holiday sales. The period between Thanksgiving and Christmas used to define the season, but shoppers are starting much earlier than they used to (especially if incented to do so). And the redemption of gift cards carries receipts well into January.

Some analysts dismiss holiday spending as being a small part of a bigger picture.  Nonetheless, it continues to garner substantial attention. 

My holiday budget didn’t have room for anything from Tiffany or Louis Vuitton, but the shops were busy.  More so than many years, seasonal spending at the end of 2023 will provide a window into the state of the economy.

Information is not intended to be and should not be construed as an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Under no circumstances should you rely upon this information as a substitute for obtaining specific legal or tax advice from your own professional legal or tax advisors. Information is subject to change based on market or other conditions and is not intended to influence your investment decisions. © 2023 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with limited liability in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. For legal and regulatory information about individual market offices, visit

Carl R. Tannenbaum

Executive Vice President and Chief Economist
Carl Tannenbaum is the Chief Economist for Northern Trust. In this role, he briefs clients and colleagues on the economy and business conditions, prepares the bank's official economic outlook and participates in forecast surveys. He is a member of Northern Trust's investment policy committee, its capital committee, and its asset/liability management committee.


The Canadian economy is buckling under the weight of higher interest rates, household debt and immigration.

Both supply and demand of workers will prevent a surge in unemployment rates.