Visa Anticipates 7.5 Percent Growth In Holiday Spending

“It’s a mixed bag of indicators this year – lower energy prices, continued positive employment trends and a real estate slowdown,” said Wayne Best, senior vice president of business and economic analysis for Visa USA. “This suggests a sustainable holiday shopping season and bodes well for specific sectors like personal entertainment, sporting goods and hobby stores, and specialty retailers or stores commonly found in a mall environment. We also expect this will be a good year for many online retailers.”

Based on a thorough analysis of spending on Visa-branded credit, debit and prepaid cards, Best predicts three major trends for this holiday season:

• Consumers Will Seek Value Purchases: The Federal Reserve’s pause in raising interest rates combined with the soft real estate market will cause homeowners to be cautious about using their home equity line of credit as a personal ATM machine. Although Best anticipates a decrease in big-ticket durable goods spending as a result, he does expect consumers to make “value purchases.” These would include spending on personal items and activities consumers value most, such as dining out, personal services and family entertainment, which will drive personal entertainment consumption.
• Travel and Tourism Off To a Slow Start: Fewer bookings in September, which traditionally is a strong indicator for holiday travel, coupled with lower gas prices point to decreased travel spending during the holidays. As an alternative, travelers will opt to take shorter regional trips.
• Web a Key Tool for Time-Strapped Consumers: As the U.S. workforce continues to rebound, many consumers will find themselves “strapped” for time and turning to e-commerce channels for their holiday shopping needs. Cyber Monday, or the Monday following Thanksgiving weekend, will continue to be a popular time for online purchases as consumers accommodate their busy schedules and avoid crowded shopping malls.

“Americans will continue to look for value purchases that won’t leave them strapped for cash in the long run, which is why big-ticket items such as furniture and appliances will not be as popular as in previous years,” Best predicted. “The exception will be big-ticket personal entertainment products, such as high-definition televisions, which should see good growth.”

“We expect big-box and general retail stores to experience moderate growth, but not at last year’s levels,” Best added. “On the other hand, we expect restaurants to record positive holiday numbers, in line with last year’s growth figures.”

Purchase Personal Consumption Expenditure (PCE) in the United States amounts to more than $7.2 trillion annually, with general-purpose payment cards capturing about a third of that total. Spending on Visa-branded credit, debit and prepaid products represents nearly 17 percent of total Purchase PCE. That means $17 out of every $100 spent by consumers is on a Visa-branded card.