Cheaper Turkeys, Cheaper Gas — Is Inflation Finally Breaking?

Key Concepts

• Thanksgiving Dinner Costs: Analysis of the decrease in the cost of a traditional Thanksgiving dinner for 10 people compared to the previous year.
• Turkey Prices: Factors influencing the reduction in turkey prices.
• Crude Oil Prices: Impact of crude oil price fluctuations on transportation costs and overall inflation.
• Gasoline Prices: Historical trends and recent changes in gasoline prices, attributed to policy decisions.
• Inflation: The relationship between gasoline prices and overall inflation rates.
• Consumer Spending: Expectations for holiday shopping season sales and consumer behavior.
• Black Friday & Cyber Monday: Evolving significance of these shopping events and their impact on total holiday spending.
• Interest Rates: The role of credit card interest rates and potential Federal Reserve rate cuts in stimulating the economy.
• Holiday Shopping Trends: Shifting patterns in consumer shopping behavior, including the importance of later shopping days.
• Demographic Shopping Habits: Differences in shopping behavior among age groups, particularly older consumers.

Thanksgiving Dinner Costs and Contributing Factors

The cost of a traditional Thanksgiving dinner for 10 people has decreased compared to the previous year. This reduction is primarily driven by a substantial drop in turkey prices. Mark Leusty attributes this to "Trump's tough turkey policies," which have brought turkey prices "down to earth."

Impact of Crude Oil and Gasoline Prices

Mitch Fstein highlights the decline in crude oil prices, which he links to "Biden's war on fossil fuels." He notes that crude oil is down 30% to $57 a barrel. This decrease in oil prices is expected to lead to lower gasoline prices, which in turn will reduce transportation costs for food items. Fstein recalls that under President Trump, gasoline prices were around $2-$2.11 a gallon, and under Biden, they surged by 70%, contributing to a 9.1% inflation rate in gasoline. While produce prices may remain elevated due to transportation, the overall trend of falling oil and gas prices is positive for consumers.

Mark Leusty emphasizes that lower gas prices benefit consumers not just at the pump but also indirectly through reduced transportation costs for all goods. He states, "It's everything that people buy. It has to be moved. It has to be shipped. It has to be transported. And the more distance, the more that things have to travel, the more the price of gas factors into what people wind up ultimately paying."

Black Friday and Holiday Shopping Expectations

The expectation for the upcoming holiday shopping season is for a record sales year, with an estimated $1.04 trillion in sales between November and December, a 4% to 4.4% increase from last year. Mitch Fstein views this as a positive sign for the economy. He also advocates for capping credit card interest rates and for a December interest rate cut by the Federal Reserve, noting that the 10-year Treasury note is trading below 4%, indicating market expectations for such a cut.

However, Mark Leusty suggests that the traditional urgency of Black Friday and Cyber Monday is diminishing. He observes that "the impact of Black Friday and even Cyber Monday is getting fairly diluted with Amazon Prime Days and other specials." Retailers are no longer solely relying on these specific days to create a sense of urgency (FOMO). Currently, Black Friday accounts for less than 9% of total holiday spending.

Shifting Shopping Habits and Demographics

Leusty advises consumers not to feel compelled to rush out on Black Friday for deals. He suggests enjoying Thanksgiving leftovers and relaxing. He points out that the biggest shopping days are now "Super Saturday" (the Saturday before Christmas) and the Monday before Christmas. Notably, consumers over 50 account for over 60-70% of these "Super Saturday" sales, as they tend to avoid Black Friday and Cyber Monday shopping. Mitch Fstein humorously disagrees with the idea of waiting until the last minute, implying he is already actively shopping.

Conclusion

The current economic outlook for the holiday shopping season appears positive, with expectations of record sales driven by lower Thanksgiving dinner costs (largely due to cheaper turkeys) and the beneficial impact of falling oil and gas prices on transportation costs. While traditional shopping events like Black Friday are becoming less dominant, consumer spending is still projected to be strong. The potential for interest rate cuts and the significant spending power of older consumers on later shopping days are key factors to consider.