Jan Kniffen on Consumer Spending, Tariffs, and Retail Performance

Consumer Spending Drivers

• 💡 Consumer spending is primarily driven by employment status, job security, and wage growth, not sentiment.
• 💰 Consumers are spending because they have the means, with wages outpacing inflation.
• 🎯 Spending strength is concentrated in the upper deciles of the economy, while lower deciles are struggling.

Holiday Retail Performance

• 📈 Retailers are expected to see 4-5% growth in holiday spending, indicating a strong performance.
• ✅ This growth is anticipated to come with good gross margins and without an extended expense structure, leading to positive earnings.

Impact of Tariffs on Retail

• 📉 Tariffs have resulted in price increases of about 3% on discretionary goods, which is lower than initially feared.
• 🛠️ Retailers managed to mitigate tariff impacts by finding better supply chain solutions and adjusting product configurations.
• ⚠️ While large, well-capitalized retailers have largely been unaffected, smaller retailers are facing bankruptcies and market share loss.

Economic Outlook for 2026

• 💸 Consumers will benefit from a tsunami of tax refunds in the spring, further supporting spending.
• 📊 Inflation is currently running around 2.7%, which is manageable and significantly lower than feared.
• 📈 The overall economic environment, despite some challenges, has been handled well by large retailers.