Mastercard expects consumers to continue spending freely during this upcoming holiday season.
In its latest SpendingPulse survey released this week, Mastercard said it sees U.S. retail sales excluding cars rising 7.1% during the holiday season, which it defines as the window between November 1-December 24. Mastercard notes its data is not adjusted for inflation.
Last year, holiday spending rose 8.5% from the prior year after a muted 2020 season. Compared to 2019, retail spending during the holiday season is expected to rise 18.8%.
During the pandemic, many consumers started their holiday shopping early to avoid order delays, and Mastercard expects those trends to continue.
"What we're hearing from retailers that it's still an early start to the holiday season. You're still hearing about Christmas in September," Michelle Meyer, U.S. Chief Economist, Mastercard Economics Institute, told Yahoo Finance Live on Tuesday (video above). "People are aware of that and they're out there looking for those deals, they're out there looking for the best product."
In fact, holiday shopping is slated to start early once again, pulling forward the season’s retail growth in October as consumers look for the best bargain. Apparel spending is set to be higher by 4.6% over last year and luxury up 4.4% as both categories are slated to be hot ticket items for the holidays.
This year's holiday spending is also set to include more discounts than in previous holiday shopping seasons. As inflation has reshaped consumers' spending habits, bargain shopping is expected to be in full force during the holidays.
“This holiday retail season is bound to be far more promotional than the last,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated.
“Easing supply chain issues coupled with the rapid shift in consumer spending trends and over-ordering inventory have left retailers in an interesting position ahead of the holidays. Retailers that were able to clear past merchandise and accurately forecast inventory needs will be the best positioned for growth.”
Retailers have been scrambling to discount their bloated inventory and clear shelves ahead of the holiday season. Walmart, for example, canceled orders and cut prices on items like apparel.
E-commerce is also anticipated to grow less quickly than overall spending, rising 4.2% over last year as consumers turn back towards checking for the best price in-person.
In Meyer's opinion, the move toward more online shopping has allowed for a "spreading out of the discount season."
"It's no longer just one or two days of door buster deals. It's the ability to offer those types of [discounts] and really respond to what you're seeing in terms of the consumer and the part of the retailers," Meyer said.
Mastercard’s data suggests in-store retail sales will rise 7.9% over last year as retailers aim to boost foot traffic in their stores. Given the rise in popularity of online shopping over the past decade, following two years of in-store traffic loss due to the pandemic, in-store spending made up more than 4/5 of retail sales from January through August 2022, the credit card company noted.
"It's still going to be a more prolonged season, but that panic in some ways that we saw last year, where people were worried they weren't gonna get any product and they didn't really understand necessarily how to navigate the holiday period, that I think has abated as we look forward towards this season," Meyer added.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv