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Santanomics: The economics of the festive season December 2014 www.pwc.com

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Santanomics: Theeconomics of the festiveseasonDecember 2014

www.pwc.com

PwC

Contents

Slide 3 - Introduction

Slide 4 - Executive summary

Slide 5 - Christmas spending in 2013

Slide 8 - Trends in Christmas spending

Slide 14 - Appendices

2December 2014Santanomics: The economics of the festive season

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Introduction

• During the Christmas period, consumers in many countries increase their spending as theypurchase presents, decorations, food etc. for the festive period. This increase in spending makesthis a ‘make or break’ time for retailers and their supply chain. Therefore businesses need to beaware of how consumer spending will change over this period.

• To this end, we have attempted to calculate spending over the Christmas period by looking at theexcess spending that occurs in November and December over and above the average of the othermonths of the year.

• We have estimated spending over the Christmas period, both in per person and aggregate terms, inthe major Western economies, Brazil and Russia, and the peripheral Eurozone economies that wemonitor (see the appendices at the back for a more detailed description of our methodology and thesources of the data we used).

• It should be noted that our results give a broad indication of cross-country trends in Christmasspending but should not be taken as precise dollar estimates.

• The following slides set out our results and show how countries have moved in the rankings overtime, as well as how Christmas spending has recovered from the financial crisis.

3December 2014Santanomics: The economics of the festive season

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Executive summary

We have analysed real spending over theChristmas period across 12 countries. Our resultsshow that:

1. Ireland tops the rankings of Christmasspending per person, with shoppersspending around $1,200 during the holidayseason;

2. GDP weighted Christmas spending per personin the Eurozone periphery fell byaround 28% overall between 2007-13(see chart), as the crisis hit these economiesparticularly hard.

3. In terms of aggregate Christmasspending, Brazil and Russia make theTop 10 despite spending relatively little perperson (see chart); and

4. The US remains the largest Christmasmarket in the world, spending more than$240 billion during the holidays.

Real Christmas spending per person is lower inBrazil and Russia than in advanced economies

Sources: PwC analysis, Datastream, national statistical agencies, World Bank

0

200

400

600

800

1000

Major Westerneconomies

Eurozoneperiphery

Brazil andRussia

GD

Pw

eig

hte

dC

hri

stm

as

sp

en

din

gp

er

pers

on

(co

nsta

nt

2013

US

$)

2007 2013

Notes: Major Western economies – G7 excluding Japan

Eurozone periphery – Greece, Portugal, Ireland & Spain

4December 2014Santanomics: The economics of the festive season

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Christmas spending in 2013

5December 2014Santanomics: The economics of the festive season

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Ireland ranks top of the per person Christmas spending league tablewith the UK ranking highest amongst the major Western economiesReal Christmas spending per person (constant 2013 US$)

Sources: PwC analysis, Datastream, national statistical agencies, World Bank

Ireland

1,184

UK

1,065

US

776

Canada

682

France

574

Portugal

357

Italy

462

Germany

520

Greece

188

Spain

184

Brazil

166

Russia

93

Key

Ranks 1-3

Ranks 4-6

Ranks 7-9

Ranks 10-12

6December 2014Santanomics: The economics of the festive season

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The US is the largest Christmas market in the world with spending in2013 above that of the UK, Germany, France and Brazil combinedReal total Christmas spending (constant 2013 US$ bn)

Sources: PwC analysis, Datastream, national statistical agencies, World Bank

Ireland

5

UK

68

US

245

Canada

24

France

38

Portugal

4

Italy

28

Germany

42

Greece

2

Spain

9

Brazil

33

Russia

13

Key

Ranks 1-3

Ranks 4-6

Ranks 7-9

Ranks 10-12

7December 2014Santanomics: The economics of the festive season

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Trends in Christmas spending

8December 2014Santanomics: The economics of the festive season

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How has Christmas spending changed over time?

On a per person basis:

• Ireland, the UK and the US were the top 3 Christmas spenders in our sample in 2003, 2007 and2013;

• Italy has been on a generally downward trend moving from 4th in the rankings in 2003 to 7th in2013; and

• Brazil and Russia ranked bottom of the Christmas spending league in 2003, 2007 and 2013.

In aggregate terms:

• The US is the clear leader in overall Christmas spending;

• By 2013 Christmas spending in Brazil had overtaken that in Italy while Russia had overtakenSpain and Greece; and

• Greece has moved from 9th in 2003 to last in 2013.

9December 2014Santanomics: The economics of the festive season

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2003Rank

Country 2007Rank

Country 2013Rank

Country

1 Ireland 1 Ireland 1 Ireland

2 UK 2 UK 2 UK

3 US 3 US 3 US

4 Italy 4 Canada 4 Canada

5 Canada 5 France 5 France

6 Germany 6 Italy 6 Germany

7 Greece 7 Greece 7 Italy

8 France 8 Germany 8 Portugal

9 Portugal 9 Portugal 9 Greece

10 Spain 10 Spain 10 Spain

11 Brazil 11 Brazil 11 Brazil

12 Russia 12 Russia 12 Russia

Irish consumers spend the most per person over the Christmas periodwhile Brazil and Russia sit bottom of the rankingsReal Christmas spending per person rankings

Sources: PwC analysis, Datastream, national statistical agencies, World Bank

10December 2014Santanomics: The economics of the festive season

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Spending per person over the Christmas period increased most inIreland and the UK compared to the other months of the year in 2013Boost in spending during November and December compared to the rest of the year

0%

5%

10%

15%

20%

25%

30%

35%

Ireland UK Brazil Portugal Canada France Italy US Germany Russia Greece Spain

Sp

en

din

gb

oo

st

du

rin

gC

hri

stm

as

2013

co

mp

are

dto

the

rest

of

the

year*

(%)

Sources: PwC analysis, Datastream, national statistical agencies, World Bank

2013 average – 16%

2007 average – 18%

11December 2014Santanomics: The economics of the festive season

*This shows by what percentage spending in November and December exceeds the average spending in 2 months of the year during the non-Christmas period i.e. January - October

PwC

Russia, Germany, the UK and Brazil spent more per person lastChristmas than in 2007Recovery of Christmas spending per person from the financial crisis

Sources: PwC analysis, Datastream, national statistical agencies, World Bank

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Russia Germany UK Brazil Ireland France Canada US Italy Portugal Spain Greece

Ov

era

llp

erc

en

tch

an

ge

inp

er

pers

on

Ch

ristm

as

sp

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g(2

007-1

3)

12December 2014Santanomics: The economics of the festive season

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2003Rank

Country 2007Rank

Country 2013Rank

Country

1 US 1 US 1 US

2 UK 2 UK 2 UK

3 Germany 3 France 3 Germany

4 Italy 4 Germany 4 France

5 France 5 Italy 5 Brazil

6 Brazil 6 Brazil 6 Italy

7 Canada 7 Canada 7 Canada

8 Spain 8 Spain 8 Russia

9 Greece 9 Russia 9 Spain

10 Russia 10 Greece 10 Ireland

11 Ireland 11 Ireland 11 Portugal

12 Portugal 12 Portugal 12 Greece

In aggregate terms, Christmas spending in Brazil has overtaken that inItaly while Russia has overtaken Spain and GreeceReal total Christmas spending rankings

Sources: PwC analysis, Datastream, national statistical agencies, World Bank

13December 2014Santanomics: The economics of the festive season

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Appendices

14December 2014Santanomics: The economics of the festive season

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Appendix A: Methodology

The following approach was used to obtain estimates of Christmas spending:

• We obtained real annual household consumption per capita and real annual householdconsumption data from the World Bank as well as real monthly retail sales data (non-seasonallyadjusted) from national statistical agencies.

• We then converted both the total and per capita household consumption data into a monthlyformat by assuming it follows the same trend i.e. monthly distribution, as retail sales.

• Using this new series, we defined and estimated Christmas spending as the excess expenditurearising in November and December compared to the other months of the year. However otherseasonal spending patterns may exist during a calendar year, and the distribution of Christmasspending could also vary, for example, a larger share of Christmas spending could occur beforeNovember. Therefore these numbers should be interpreted as giving a broad indication of cross-country differences in Christmas spending habits as opposed to precise dollar estimates.

• We limited our analysis to the G7 excluding Japan (which we have called the major Westerneconomies), Brazil and Russia, and the peripheral Eurozone economies which we monitor. Weexcluded China, Japan and India as Christmas is not a traditional holiday there, despite Christmasbecoming more of a commercial event in these countries, as any results and interpretations couldhave been less reliable.

• All of our numbers are in constant 2013 US dollar terms.

15December 2014Santanomics: The economics of the festive season

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Appendix B: Data sources

Variable Reason for including Source (s)

Retail sales (non-seasonallyadjusted)

The trend in monthly real retail sales wasused to convert annual householdexpenditure data into a monthly format

National statistical agencies,Thomson Reuters Datastream

Consumer prices index This was used, where necessary, todeflate a nominal retail sales time series

National statistical agencies,Thomson Reuters Datastream

Annual household finalconsumption expenditure percapita (constant 2005 US$)

This was converted into a monthly seriesassuming it follows the same trend asretail sales

World Bank World DevelopmentIndicators

Annual household finalconsumption expenditure(constant 2005 US$)

This was converted into a monthly seriesassuming it follows the same trend asretail sales

World Bank World DevelopmentIndicators

US GDP deflator Data was converted from constant 2005US$ into constant 2013 US$ using the USGDP deflator

US Bureau of Economic Analysis,Thomson Reuters Datastream

GDP (current US$) GDP weights were calculated usingnominal GDP to estimate the GDPweighted Christmas spending per person

World Bank World DevelopmentIndicators

16December 2014Santanomics: The economics of the festive season

For more details about this report please contact…

This publication has been prepared for general guidance on matters of interest only, and doesnot constitute professional advice. You should not act upon the information contained in thispublication without obtaining specific professional advice. No representation or warranty(express or implied) is given as to the accuracy or completeness of the information containedin this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, itsmembers, employees and agents do not accept or assume any liability, responsibility or duty ofcare for any consequences of you or anyone else acting, or refraining to act, in reliance on theinformation contained in this publication or for any decision based on it.

© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, "PwC" refers tothe UK member firm, and may sometimes refer to the PwC network. Each member firm is aseparate legal entity. Please see www.pwc.com/structure for further details.

Richard BoxshallT: +44 (0)20 7213 2079E: [email protected]

Barret KupelianT: + 44 (0)20 7213 1579E: [email protected]

Conor LambeT: +44 (0)20 7212 8783E: [email protected]

To find out more read ourarticles on this topic:

Santanomics: Who spends themost during the festive season?

Scars from financial crisis stillvisible on Christmas spending