Santa economy gets less ho ho ho

Festival sales are projected to cross $1 tn in the US this year, but growth is slowing, which makes Christmas a little less merry for Asian exporters. Americans are still buying expensive gifts in the shadow of a possible trade war with China, but they have started to pull back on holidays and dining out. Consumer sentiment remains strong, but is turning cautious in the EU and Britain as well. Inflation expectations are high as uncertainty over US tariffs drags on. Christmas sales are being driven by promotions across the board, and brands are absorbing higher input costs to remain competitive.

This season could be an inflection point for retailers because the well-heeled are keeping the Yuletide spirit alive for them. Impulse shopping is down at bargain supermarket chains. Online marketplaces are offering deals on essentials. There is also a rise in deferred payment purchases. The main body of consumers is pulling back and has to be lured with heavy discounts. The Santa effect is in play as shoppers spend in bursts to stretch their budgets. But it may not work for too long as consumer anxiety overtakes producers' ability to mark down prices. The trigger would be signs of fragility in the US job market.

Parts of the world like Asia, where Christmas sales don't matter as much, are reporting stable consumer sentiment as inflation eases. Some of the global uncertainty is rubbing off on them, but they remain cautiously optimistic. The Santa effect is being cast wider as retailers target younger demographics and rising purchasing power. Asian consumers prioritise value over exuberance, and this makes for an interesting marketplace for brands. Lifestyle choices are undergoing rapid changes in China and India, markets that require customised marketing. Festival shopping patterns differ in these countries, and one-size-fits-all strategies may not capitalise on domestic consumer confidence. These markets are spreading the Christmas cheer over many more months for global brands.