What Big Holiday Spending Tells us About the Economy Post Turkey-Day - TheStreet

Strong Holiday Spending Means These Key Points to Start 2019

Big holiday spending could mean a let-down in January, a month that could kick off a slower growing economy for 2019.
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Holiday spending is expected to be notably strong for 2018, but with that strength comes an important and less talked-about implication for the time just after the holidays. 

Holiday spending is expected to come in at roughly a 4% to 5% year-over-year increase, according to the Nation Retail Federation. But that could prove to be a modest estimate. Tendayi Kapfidze, Chief Economist at LendingTree said "We're going to get probably the strongest holiday spending growth since 2011, probably in the high 6's, 7, 8% range." 

But that will likely mean a considerable come-down in consumer spending in January. "If you look at the seasonality of credit card balances, what you see is, you get a big spike in November into December, and then in January you actually get negative growth in credit card balances as people pay off," Kapfidze said. 

Taking a longer-term view, the economy is currently doing well, but whether or not it has much juice left in it remains to be seen. The unemployment rate is currently 3.7%, which is roughly a 40-year low. "It's difficult for the rate to go much lower than it is right now," Kapfidze said. 

The year of 2018 "was kind of a year on steroids," he mentioned, saying that any expected slowdown in 2019 is relative to the growth seen in 2018, much due to President Trump's tax cuts. While he thinks 2019 could still be a strong year, he thinks "there's growing risk of recession -- 2019, 2020, going forward." Basically, since the economy has grown so slowly in its recovery from the great recession, any unexpected shock could immediately send the economy into a tailspin. 

This is an increasingly popular view among many economic experts, like former Adviser to the President of the Dallas Federal Reserve Danielle DiMartino, who thinks a recession could be on its way sooner rather than later