You have undoubtedly heard about the difficulty in getting holiday gifts this year, due to supply chain problems. As a reminder, there have been problems with the global supply chain for some time, which were further exacerbated by trade conflicts. Then, when COVID hit, factories from China to South Korea to Germany were shut down or were forced
to reduce production because workers were sick or in lockdown. In response, shipping companies cut their schedules in anticipation of a drop in demand.
But demand never really eased up. Locked down Americans simply redirected the money that they had previously spent on services and started buying goods. Many were able to use stimulus checks and excess savings to keep demand high and as a result, the timing and quantity of consumer purchases swamped the system.
Factories couldn’t catch up fast enough. When they did produce the goods, there were not enough shipping containers available, which in turn caused transportation expenses to skyrocket. And of course, labor shortages, especially among truck drivers, have also slowed the movement of goods and have contributed to higher prices across the board.
I warned about these issues right after Labor Day, telling the audience of CBS Mornings that the kinks in the global supply chain would likely result in product shortages, especially for the most in-demand products of the 2021 holiday season. Many consumers heeded the warnings and started the holiday shopping season in earnest. The government reported that retail sales were up 1.7% in October from September, the highest monthly increase since March of this year — sales were up 16.3% from a year ago.
Part of the increase in retail sales is due to the overall increase in prices, but even when adjusted for inflation, spending is higher than it was before the start of the pandemic. Higher wages, ample savings, and the desire to start the holiday season early to combat supply chain issues all contributed to the robust results in October. The report tamped down fears of a revolt against consumerism, which emerged after the University of Michigan’s sentiment index showed a surprise drop to a 10-year low in the preliminary November reading.
If Americans are worried, they are not acting like it, and don’t plan to pull back on their holiday spending because of inflation anxieties. According to Deloitte’s annual holiday retail survey, holiday spending is expected to average $1,463 per household, up 5% from 2020, and just three bucks below the 2019 level of $1,496. In fact, the strong retail sales report, combined with anticipation of a strong holiday shopping season has fueled optimism that the economy has snapped back from the Delta summer slowdown and is back on track. Analysts predict that growth, as measured by gross domestic product, could come in at 4% to 5% for the last three months of the year, which would be twice as fast as the third quarter.
In thinking back to that TV segment from a couple of months of ago, I recall that some viewers wrote in and implored me to stop being a Grinch about supply chain woes. In the moment, I felt defensive about being too Grinchy, but in honor of the start of the holiday season, I am embracing the label. Not the early, stingy Grinch, but the one whose heart grew three times after understanding the true meaning of the season, the one who concluded “Maybe Christmas doesn’t come from a store. Maybe Christmas perhaps means a little bit more!” That message is the one that I am adopting for the 2021 holiday season — I hope you do too.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.
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