The U.S. economy is consumer-based, and while there hasn't been a complete loss of consumer confidence, there has certainly been an erosion over the past few years.
The IBD/TIPP Economic Optimism Index dropped to 36.3 in October from 43.2 in September, missing market forecasts of 41.6. October marked more than 2 years in which the index has been in pessimistic territory.
The six-month economic outlook index dropped by about a quarter, a record low since the survey began in early 2001.
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Despite reports of higher wages, the personal finances subindex fell 6 points to 46.8 (pessimistic territory), meanwhile the IBD/TIPP Financial-Related Stress Index rose 2.4 points to 70.5.
But despite the depressed economic outlook among the people in the U.S., retailers are expecting Americans to spend a record amount money this holiday season.
The National Retail Federation forecast 2023 holiday spending to rise between 3% and 4% year-over-year to between $957.3 billion and $966.6 billion (non-inflation adjusted).
"Consumers remain in the driver’s seat, and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions and elevated interest rates,” NRF Chief Economist Jack Kleinhenz said. “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace."
The optimistic outlook is being driven by online shopping, which the NRF says has been "one of the biggest shifts in consumer behavior" in a post-Covid-19 world.
Online and other non-store sales are expected to grow between 7% and 9% year-over-year to between $273.7 billion and $278.8 billion.
Big box retailer Target has struggled to right-size it's inventory to lower, post-Covid-19 levels as Americans have been buying fewer discretionary items for seven consecutive quarters.
But even Target TGT has a positive outlook on American spending heading into the holiday season.
"The American consumer is enjoying those seasonal moments. Whether it's Halloween or the summer moments going back to Mother's Day and Father's Day. They are still enjoying those moments," Target CEO Brian Cornell told CNBC this week.
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