ISU economist expects small increase in Christmas spending

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via Radio Iowa

An Iowa State University expert says the current economic climate in the state should lead to a little more spending this holiday season.

Economist David Swenson says Iowa’s economy has generated some confidence in consumers. “The economy right now both in Iowa and in the nation looks pretty much like it did last year. We’ve had consistent but not great growth.We’ve had real growth in incomes — our wages have gone up and our average household incomes have gone up — even more so than inflation,” Swenson says. “So, you put those two things together and you’re going to have consumers that are willing to spend, and you should expect a minor increase in holiday spending.”

Experts predict a 3% increase nationally in holiday spending, but Swenson doesn’t think Iowa will get to that level. “I wouldn’t expect a value quite that high for the state of Iowa. Our income growth has been a little bit slower than the national average — it’s been growth, but it’s been slower. So, I would expect our growth to be less than the national rate of growth,” he says.

The Christmas shopping season used to be seen as a time when most retailers made gains and that determined how well they would finish the year. Swenson says that’s a myth.  “There are only certain classes of retail for which spending between the middle part or the late part of November through Christmas is a substantial portion of their sales. Most of retail isn’t affected that way,” according to Swenson.

He says some specific retailers do see a holiday bump.  “Clothing stores and it’s going to be jewelry stores and it’s going to be electronic stores…and toy stores, those are the places that do a substantial amount of retail activity,” Swenson explains. “The bulk of retailers however actually have fewer sales during the December period because people are running around and buying gifts. So, there’s this give and take with regard to the retail numbers.”

The traditional retailers with the brick and mortar stores have been struggling in recent years as more and more holiday and other shopping is happening online. “Retail has posted nationally reductions and declines in employment — pretty persistent declines in employment — so we can see that that industry is continuing to undergo change. We know that online shopping is a big part of that. We also know that there is increased competition between many different types of retailers,” Swenson says.

He says the impact from online shopping will continue. “Your and my willingness to do online shopping increases every year and there is no reason to expect that rate of increase to change at all,” Swenson says, “It has become easier and easier to shop that way.” Swenson says issues with Iowa’s ag economy have had an impact, but that has become less as the state has done more to diversify its industries.