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Holiday Spending: A Gift for the Economy

Wednesday, December 27, 2017

By Jennifer Beatty, Public Affairs Staff

Personal consumption accounts for the largest piece of the economy, roughly 69 percent of U.S. gross domestic product (GDP). When it comes to consumption, a significant chunk of the country’s retail sales happen in November and December.

In this edition of our Timely Topics podcast, the St. Louis Fed’s own Kevin Kliesen dives into how our holiday shopping decisions might affect the overall economy.

Key Terms and Takeaways

Consumer confidence gauges how consumers feel about the economy’s current and future strength. But does feeling good translate into actual spending? Kliesen, a business economist and research officer, says confidence is only one thing to consider. Fundamentals such as unemployment rates and income growth are important, too.

Spending on credit is “basically spending out of future income,” Kliesen says. It may not matter at the checkout. But longer-term economic impacts can occur when consumer debt levels grow.

Brick-and-mortar or online shopping? They both flow into GDP, which is the total market value of all goods and services produced in an economy. Still, shopping online can have “second-order effects,” Kliesen says, such as on employment and sales taxes.

Additional Resources

Jennifer Beatty 

Jennifer Beatty is an assistant vice president in Public Affairs at the St. Louis Fed. 

Tagged kevin kliesenholidayconsumer debttimely topicsgdpforecasting