Is Christmas a Big Deal for the Economy?

There’s a quaint old story that you may have heard before:

A wise man provides a valuable service to a king, and in return the king offers the wise man anything he can ask for. The wise man smiles and thanks the king for his magnanimity, but says he only asks that one single grain of wheat be placed on the first square of a chessboard, then two grains on the next square, and then three grains on the third square, and so on until the chessboard is filled up. The king shrugs at this odd request, but orders that it be so. As a meager portion of grain is placed on the first few squares everyone thinks the wise man has chosen foolishly. But as more and more spaces are filled with increasing numbers of grains it dawns on them that the quantity of wheat is more and more substantial. The wise man has, after all, gained a great boon in a surprising way!

 

This story illustrates how hard it can sometimes be to judge quantities. And the same difficulty arises with respect to the economic effect of various stimuli, including Christmas shopping. Here’s a clip from a recent news report from ABC News:

With only six days left before Christmas, holiday shoppers are flooding the malls and local stores. Nearly half of shoppers have not finished their Christmas shopping yet, and the traditional biggest shopping days — Black Friday, Cyber Monday, and Green Monday — are all behind us. The outlook seems to be that it’s shaping to be a robust season for the economy.

We’ve heard before that “holiday shopping” provides a big boost to the economy. I found one site that says it is “the largest economic stimulus” of all:

Christmas is typically the largest economic stimulus for many nations around the world as sales increase dramatically in almost all retail areas.

But just how big a deal is Christmas retail sales and the boost it gives to the economy? We get a pretty good answer from the Census Bureau’s report on Retail Sales. The link shows the source of the data, which is probably about as complete and accurate a tally as exists. My chart illustrates the trend for last year:

 

[Source: US Census Bureau]
[Source: US Census Bureau]
You can see the uptick there at the right edge of the chart — signalling the month of December. But does that really look like a big deal? December is the month with the highest total, but not by much. One of the sites I link above contends that the holiday shopping season accounts for nearly 20% of all US retail sales. That is true — if you define the holiday shopping season to include nearly 20% of the year and include all sales during that time as “holiday shopping.”

December sales were $371 billion, or 10.3% of the annual total. The monthly average was around $301 billion. The month with the lowest sales total is February, which is not surprising simply because it has only 28 days. If you consider that people eat food and brush their teeth and change their socks and replace lost umbrellas and damaged smartphones in December just as they do in every other month — and that most of the money they spend in December is spent on the same things they spend money on in every other month — it comes clear that the December boost is only about $69 billion or 1.9% of annual sales. That is a far cry from the exaggerated nearly 20% claimed by the news story.

I once had a heated argument with someone about the economic boost associated with hosting a Super Bowl. He insisted the effect was astounding because of all the people who would be eating food in restaurants and staying in hotels and riding in cabs and so forth. I agreed that those activities were all helpful spurs to economic activity. But I asked him, “Do you know another time when people eat at restaurants and stay in hotels and ride in cabs? Every single other day of the year!” He just wouldn’t hear it, and when I showed him numbers, he wouldn’t consider those either.

So, chalk up the hoopla about holiday shopping to another lazy, routinized news story. Remember that what really boosts an economy is ordinary people going about their ordinary lives. No government initiative or specially negotiated deal works as well as a fair system where everybody is working and paying and living and dying like normal. And is it asking too much to have them work and pay and live and die in a couple of decent rooms and a bath (and affordable health care and good public education)? Anyway, the datasaur doesn’t think so.

 

Christmas is a big deal, by the way, in terms of religious and cultural significance. My friend Mike Mercer at Internet Monk has the first perspective. A savior coming to Earth doesn’t happen every day! And here’s a brief taste of that trove of glorious Christmas music that, if you avoid malls and big box stores, more than balances the bad Christmas music.

 

I’m going to be singing this and several other wonderful songs at our church’s Christmas Eve service, under the guidance of our excellent director, Edward Atkinson.

 

So, Merry Christmas to all!

 

 

Harking back to my opening story, do you have any idea how much wheat the wise man accumulated by the time the chess board was filled? The answer is not what you expected unless you thought about it: only 2,080 grains!

You’ve probably heard the story, or some variation of it, in which the man gets an astounding amount due to compounding. But to accomplish that he would have needed to ask that the amount be doubled: 1, 2, 4, 8, 16, 32, 64, 128, etc. By the 64th square, that amounts to 9.2 raised to the 18th power. Ya gotta pay attention to detail!

 

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