After Christmas, US consumption is expected to pick up. Will the giants collectively make a comeback next year?

According to new research by Goldman Sachs analysts, after a year-long decline, U.S. household cash flow will begin to grow again after Christmas and accelerate in the new year, reversing the negative growth of U.S. household disposable cash flow over the past year.

Household cash flow is the main factor driving consumption, which is good news for the U.S. retail industry. Under the pressure of inflation, weak consumption and excess inventory, the financial reports released by U.S. retail giants in the second quarter were not satisfactory.

How does consumer cash flow affect the retail market?

Data shows that the decline in U.S. retail stocks this year is about twice that of the broader U.S. stock market index.

Despite higher savings, consumer spending fell overall, largely due to the end of stimulus incentives, which reduced household cash flow, and further reduced household cash flow during the COVID-19 pandemic as consumers rushed to buy furniture and other home-related goods.

But according to Goldman Sachs, a turnaround is coming.

The decline in consumer cash flow was sharp at first, but the rate of decline is steadily narrowing. In the first quarter, consumers' discretionary cash fell 10% year-on-year. Goldman Sachs said that will narrow to a 2.7% decline this quarter and a 1.2% decline during the holiday season.

Goldman Sachs estimates show that next year, the numbers become more positive throughout the year. Consumer cash flow will increase by 2% in the first quarter and increase to more than 6% in the second half of 2023, with an overall benefit of about $600 billion.

Retail giants benefit first, and future prospects are optimistic

While rising consumer incomes are good news for the economy, the growth will help larger retailers like Amazon, Walmart, Target and others even more, according to CFRA Research analyst Arun Sundaram.

However, small and medium-sized retail enterprises still face many challenges. The sluggish retail industry conditions this year have prevented smaller consumer companies from gaining favor from the capital market, which has become more picky even when conditions improve.

Inflation continues to hurt the ability of small businesses to maintain profits amid rising prices for inputs ranging from raw materials to energy, transportation and labor.

Therefore, even if the performance in the first half of this year is not satisfactory, the major retail giants are increasing their investment. Walmart has increased its investment by 50% to $7.5 billion in the first half of the fiscal year ending in January. Target's second-quarter profit fell by 90%, but its investment amount almost doubled from $1.34 billion to $2.52 billion.

But before performance improves, retailers still need to get through the relatively sluggish back-to-school and holiday shopping seasons, when household income will still be lower than in 2021. In addition, excess inventory is also a problem that retailers need to deal with at present.

Editor✎ Ashley/

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