Shoppers walk around Twelve Oaks Mall on November 24, 2023 in Novi, Michigan.
New York CNN  — 

How many people are on your holiday shopping list this year? Are you going to splurge or bargain hunt? Will you spend within your means or take on debt?

A lot of attention is currently being given to those kinds of questions, since they can provide economists and analysts with clues into how much consumers are likely to spend over the holiday season and what it means for the US economic outlook.

Even though holiday purchases constitute a relatively small share of the economy, they contribute to overall consumer spending, which accounts for more than two-thirds of US gross domestic product.

“It shows the psychological mind frame of consumers,” said Mickey Chadha, vice president of corporate finance at Moody’s Investors Services, referring to holiday spending data. “It’s a harbinger of the health of the retail industry, as well,” he added, since most retailers make the bulk of their profits for the year during the holiday shopping season.

In good times, when a lot of consumers have jobs, shoppers are easily lured into spending liberally on holiday gifts. However, in bad times, when unemployment rates are elevated, consumers are more likely to cut back on spending in general — and especially on holiday gifts.

So far, the data is making the US consumer look pretty strong.

Adobe Analytics reported a record $9.8 billion in Black Friday online sales, up 7.5% from 2022, not accounting for inflation. And for Cyber Monday, the numbers were even stronger — consumers spent $12.4 billion, a 9.6% increase from 2022.

During the peak hour, shoppers spent $15.7 million every minute, Adobe said.

But it may be downhill from here.

This year, dollar sales growth for the holidays in the United States is forecast to slow to 3.3% from 6% last year. That’s below the pre-pandemic average of 3.9% and well below rates seen in recent years, according to an analysis from S&P Global Market Intelligence.

Nevertheless, a slowdown may not be as worrisome as it sounds.

Cooling inflation is playing a role

There is a good reason behind the expected slowdown, said Aditya Bhave, senior US economist at Bank of America. It mainly boils down to cooling inflation and deflation, he said, which has been especially evident across some of the most popular goods categories including toys, electronics and apparel.

Electronics are one of the areas where holiday shoppers are likely to see steep discounts.

However, even though the annual inflation rate measured by the Consumer Price Index fell to 3.2% in October compared to 7.7% last October, consumers have become accustomed to tightening their belts. For instance, many may put off nonessential purchases in order to have enough funds for necessities like food and gas or look for deeply discounted goods to stretch their dollars. Chadha labeled this effect “inflation fatigue,” and said it may help explain why holiday sales growth may be slower this year.

That’s already showing up in some holiday shopping data.

Consumers spent 2.5% more, not adjusted for inflation, on purchases online and in stores on Black Friday compared to last year, according to Mastercard’s SpendingPulse insights. But that represents a steep deceleration from last Black Friday when sales were 12% higher compared to Black Friday in 2021.

It’s a sign that consumers are finding cheaper alternatives, said Tamara Charm, a partner at McKinsey who leads the company’s consumer insights hub. She referred to this as “trading down.”

“After enormous growth in spending over the last several years, this urge to trade down is moderating [sales growth] increases, particularly across a range of categories of concrete goods,” Charm told CNN. That isn’t happening as much with intangible purchases like travel, fitness and entertainment, she added.

But the opposite effect was true in the Adobe data.

If the data were adjusted for inflation, it would show even stronger spending growth. That’s because prices were lower across the wide range of categories that Adobe tracks, the company said. It means the spending growth it reported was “driven by net-new demand, not simply higher prices,” Adobe said.

What does this mean for the economy in 2024?

The experts CNN spoke to were all in agreement: Holiday spending data — no matter how good or bad — doesn’t represent the state of the entire US economy.

“That’s just one data point,” said Chedly Louis, vice president of corporate finance at Moody’s Investors Services. A report she coauthored with Chadha predicts holiday sales will grow “a fairly modest 1% to 3%” this year.

However, “it sets the tone for where [economic] growth will be heading in the next year,” said Michael Zdinak, economics director at S&P Global Market Intelligence. And given the holiday sales forecast, he’s also expecting “some retrenchment” in US economic growth for the fourth quarter of this year.

Coming off last quarter’s red-hot GDP report, which found the economy grew at an annualized rate of almost 5%, he said it would be “surprising given all the negative headwinds that we have in the economy for growth to grow from where we already are this year.”

US economic growth is set to slow along with consumer spending in 2024, but few economists are predicting a recession.

Charm from McKinsey said she sees this season’s holiday sales data as “a good indication of whether consumers will continue to moderate spending across a range of goods.”

Even if diminished consumer spending growth continues into 2024, many economists aren’t predicting a recession next year.

“One of the reasons we don’t have a recession in our forecast is that we’ve generally been surprised to the upside by the resilience of the consumer and we expect that to continue,” said Bhave, the Bank of America economist.

That’s because the unemployment rate is still historically quite low and many consumers, particularly those who locked in low mortgage rates, are relatively insulated from high interest rates, he said. But that’s not to say that many other consumers aren’t going to feel more financially pinched in the year ahead.