Money Monday: Holiday Shopping in a Recession?

A question mark made of one hundred dollar bills. The concept of investment in a new business, new beginnings, purchases

#faithfulfinances #moneymonday

According to Adobe Analytics, this year’s Black Friday online sales were the largest ever! Online consumers spent $9.12 Billion in sales, not to mention how much more was spent in traditional brick and mortar stores.

With Cyber Monday in full effect, Adobe Analytics estimates shoppers will spend another $11.5 billion, which represents an increase of over five percent (5%) from last year. These numbers are not indicative of consumers being concerned about a looming recession. In fact, this holiday season, consumers’ behavior appears to be contradictory to that of a recession, given their willingness to increase the debt on their credit cards or embrace more buy-now-pay-later plans. But should consumers be mindful of a recession in 2023?

Current State of Affairs

The National Bureau of Economic Research (NBER), a private non-political organization, is tasked with telling us whether or not we are in a recession. The common definition of a recession is two consecutive quarters of Gross Domestic Product ( GDP) contraction. Current facts would indicate that we are in a recession since in the first quarter of 2022, GDP decreased by 1.6 percent, followed by another decrease in the second quarter of 0.9 percent. Ah! But if only predicting a recession were that cut and dry or easy.

As it turns out, figuring out if we are in or going into a recession is much more complicated today. There are other factors to consider when making that call. These factors include retail sales, personal income, spending and employment. According to one market research company, the recessions that have followed a bear stock market since World War II have resulted in an average Standard & Poors 500 Index drop of thirty-five percent (35%).

That said, what you need to remember is that the stock market is looking forward, so by the time we figure out if we are in a recession, that will be old news. There seems to be no one conclusive answer from the experts on the length or depth of a recession if we get there.

Stay in The Moment

No one factor is definitive of a recession, but here are some of the activities you will need to monitor:

First, pay attention to the housing market. Housing sales have always been a strong indicator of whether we are heading for a recession or not. In June of this year, new homes sales fell to the lowest it has been since 2020, while pending home sales were also reduced by twenty percent (20%).

Second, an inverted yield curve is another event to monitor as you evaluate your spending and a possible recession. The terms “inverted yield curve” or “negative yield curve” are used interchangeably.

For those of you who have no idea what I am referring to, here is your financial literacy moment. An inverted yield curve simply means that short term interest rates are more than long term interest rates. Normally, you should receive a greater return on your investment if you have invested in a bond or other assets for a longer period of time. However, when the script is flipped ,and you are receiving greater rates of interest on your short term investments than you are on your long term ones, it’s a sign that the economy is heading for a recession.

Third, watch for the slow down in manufacturing. While manufacturing may not be playing a major role as it once did during the great recession, we still watch that space since it can impact other related areas of the economy. A slowdown in manufacturing would result in higher unemployment. This would also mean that consumer confidence has dwindled and that consumers are now holding on to their wallets and pocketbooks.

While I do not want to be the Grinch who stole your Christmas, lets prepared for the first two quarters of 2023.

WHAT’S UP!

Today’s what’s up is about open enrollment. It’s time to choose your health care insurance plan again. It’s also time to choose your medicare plan or plan from the individual marketplace at www. healthcare.gov. And that’s what’s up!

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.

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