Will ‘Back to School Spending’ Hurt Holiday Retail Sales?

By Douglas A. McIntyre Published Jul 21, 6:39AM EDT

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As the economy recovers slowly, among the most critical questions about GDP recovery is how much money Americans actually have to spend for more than essentials. High energy and food prices, particularly as they affect lower- and middle-class households, have made the discretionary spending puzzle even more worrisome. Usually, end-of-the-year consumer spending lifts much of the economy, particularly retail. The robustness of that spending is at risk as many people prepare to send children to school and incur costs they cannot afford.

The National Retail Federation (NRF) recently announced:

Driven by increased demand for electronic items and parents’ need to restock their children’s school supplies from last year, families this summer will spend slightly more on back-to-school items than last year. According to NRF’s 2014 Back-to-School Survey conducted by Prosper Insights & Analytics, the average family with children in grades K-12 will spend $669.28 on apparel, shoes, supplies and electronics, up 5 percent from $634.78 last year. Total spending on back to school will drop slightly to $26.5 billion as the survey found there are slightly fewer students in households this summer.

In a period in which billions of dollars often seem a small sum, it is worth noting that total year-end holiday spending totals about $600 billion. Back-to-school spending will be a useful forecaster for the holidays in two ways. First, it will show whether Americans can spend what experts believe they can on something very important — their children. Second, if there is spending fatigue, will it extend to later in the year.

Discretionary spending by consumers may be a long way from recovering to the level married to the 4% GDP per annum growth rates and sub-5% unemployment of the late 1990s and 2000. Nervous consumers see shadows around many corners as they stay anxious about their jobs and the costs of those things that they buy day to day. If the second-quarter gross domestic product is below expectations, it will be fair to question whether the year is lost entirely, and holiday spending, already weak for several years, is in for a dip.

Back to school is really nothing more than holiday spending, just a few months earlier, as economists look at it.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.