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Sunday, December 5, 2021

It’s Beginning to Look a Lot Like Christmas—and Like 2019

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By now it is clear that Americans will spend a lot more this holiday season than they did last year. But what they spend their money on, and where they spend it, will be different.

On Wednesday the Commerce Department reported that, adjusted for inflation, consumer spending last month rose 0.7% from September, putting it up 6.6% from a year earlier. Credit and bank card data from both JPMorgan Chase and Bank of America show that spending has been strong in November, and retail executives have been sounding optimistic about the holiday shopping season as well.

None of that should be particularly surprising. There were 5.8 million more U.S. jobs in October than a year earlier, and job growth, in conjunction with the stimulus checks that went out last winter and spring and the monthly child tax credit payments many families have been receiving since July, has boosted many people’s spending power. Moreover a year ago, the only people who had received Covid-19 vaccines were participants in vaccine trials. Now, 231 million Americans have received at least one shot.

But the combination of all those vaccinations and the dropping of many of the restrictions that were in place last year are changing the contours of spending. People have been heading back to stores, which has put a dent in online sales gains. In the third quarter, for example, e-commerce sales were up 6.8% from a year earlier, according to the Commerce Department, but retail sales excluding e-commerce were up 14.1%. On Tuesday, Best Buy said that its online sales were down in its fiscal quarter ended Oct. 30 from a year earlier, and Dick’s Sporting Goods showed flat online sales over the same period.

Mobility data from Google shows that visits to retail and recreation sites—places such as malls, libraries and restaurants—were down by about 5% during the past month versus their pre-pandemic baseline. But that is an improvement: During the same period last year they had been 17% lower. In another indication of how people are generally re-engaging with in-person activities, Transportation Security Administration figures show air passenger volumes, while still below pre-pandemic levels, are more than twice as high over the past month as a year ago. And passenger car traffic on interstate highways is back to where it was before the pandemic, Federal Highway Administration figures show.

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Those trends point to the shift in how money will be spent over the holidays this year. After largely hunkering down last year, many people will be traveling to visit family instead. The holiday tradition of going to the movies? For a lot of people, it will be back on. The same goes for restaurant meals on New Year’s Eve.

Will holiday spending patterns be back to where they were before the pandemic? Of course not. They will be a whole lot closer to them than they were last year, though. Might there be hell to pay, with holiday festivities exacerbating the recent rise in Covid cases? Yep.

But for all the focus on supply-chain snarls, shortages and rising prices, many investors might be missing the moves away from online purchases to in-store ones, and from spending on goods to spending on services. Those might not just be important when thinking about the holiday shopping season, but guides to the contours of Americans’ spending in the year to come.

California’s Port of Los Angeles is struggling to keep up with the crush of cargo containers arriving at its terminals, creating one of the biggest choke points in the global supply-chain crisis. This exclusive aerial video illustrates the scope of the problem and the complexities of this process. Photo: Thomas C. Miller

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Write to Justin Lahart at justin.lahart@wsj.com

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