Christmas Economics

Does America run on Christmas?

Christmas is the retail event of the year. Stores begin stocking up in September, finalizing marketing plans in October, and the period from Thanksgiving to Christmas is one nonstop retail rush to electronics stores and grocery stores and clothing stores and big-box retailers. It’s common knowledge that 70% of America’s economy is driven by consumer demand, and that about half the economy is related to retail and wholesale trade. With anywhere from a third to a half of all sales stemming from the holidays, the gift-giving season has become an essential part of our economic landscape.

And yet there are always Grinch-like economists who remind us that many people prefer a check to ill-fitting sweaters, that most toddlers like the boxes toys come in better than the toys themselves, that charities often do better with cash donations than canned goods, and that Amazon is making brick-and-mortar stores obsolete.

As long as we’ve exchanged presents there have been admonitions not to let the season become too commercial. Indeed, that’s the central message of the classic Grinch and Charlie Brown Christmas stories. And it’s a good message.

But gift-giving often isn’t just about the item. It’s about participation in each other’s lives—in a family, in a workplace, in a community. That involvement may be inefficient, but there’s more to life than getting more done.

Gift-giving may not be productive, but it lets us share our joy. And that’s good for everyone.

Douglas R. Tengdin, CFA

Chief Investment Officer

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