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Buy It Later

Mike Zaccardi

I ADVISED LAST OCTOBER that loading up on holiday gifts ahead of the main shopping season probably made sense, given problems with the supply chain. Foreign manufacturers were struggling to produce enough goods, plus many items were stuck in ships anchored off the ports of Los Angeles and Long Beach, California. Parents across the country, flush with cash, were frantic about getting their kids the latest hot toys.

What a difference a year makes. While the supply chain isn’t exactly operating smoothly, several indicators suggest the situation has greatly improved. Moreover, many U.S. retailers over-ordered during the past two years, as inventories depleted amid the pandemic-induced spending boom. Problem is, at this juncture, it seems folks prefer services like travel and eating out, rather than buying a big screen TV or new athletic gear.

Just last week, Nike reported a huge 44% quarterly jump in inventory. The retailer’s stock is now down more than 50% from the all-time high notched late last year. At the same time, big-box retailers like Walmart and Target have periodically cautioned Wall Street about their inventory gluts. Shares of those two household names are down sharply, too.

Just how much has the supply and demand dynamic shifted over the past 12 months? Look to the Consumer Price Index. At its peak several months ago, core goods inflation hit 12% for the trailing 12 months. While still elevated, analysts at Bank of America expect deflation for core goods, perhaps late next year. What about inflation among core services, like travel and dining out? That might not reach a high until right around Christmastime. Wouldn’t you know it?

Put it all together, and I think waiting until the last minute to buy things like toys, jewelry and electronics could save you a few bucks this holiday season. Retailers are bloated with goods and might slap on big discounts later this quarter. But unfortunately, traveling to see loved ones, eating out and even cooking an elaborate holiday dinner will likely be costlier than ever.

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