This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
The chart of the day
What we're watching
What we're reading
Economic data releases and earnings
Student loan repayments will probably be the Grinch that stole Christmas for most retailers.
At first blush, things seem just dandy on the surface ahead of earnings from major retailers such as Walmart and Target this week.
Third quarter consumer spending accelerated to a 4% growth rate from a meager 0.8% increase in the second quarter. Spending added a healthy 2.69 percentage points to the quarter's heady 4.9% GDP growth, supported by demand for goods and services.
Anecdotal evidence on the health of the consumer has also been surprisingly optimistic.
Marriott's CEO Anthony Capuano chimed in (see video above) with a nod to "strong" holiday season bookings trends. Not too shabby — I am eyeing a Marriott stay in December for a work trip, so I feel Anthony's vibes.
And late last week, Delta CEO Ed Bastian told Yahoo Finance's Brad Smith to "expect our fourth quarter to be a record for the company both in revenues as well as in demand." Wow, that sounds like a whole lot of people upgrading to Delta's economy plus section!
But all these smiles may not reflect what is beginning to take shape in households across the country —households gearing up for a holiday season with student loan payments that restarted in October.
A new survey of 2,000 US households from Morgan Stanley offers up some worrying initial clues.
"Our survey finds that 22% of households are federal student loan holders and among those, 41% report that they have begun making payments in October, with lower-middle income households under-performing significantly (27%). While only 8% of overall households plan to spend less on holiday shopping this year due to student loan repayment, 26% of those with federal student loans say student loans are the reason they will pullback spend. Among federal student loan holders, only 35% plan to spend more on holiday shopping, relative to 43% last year, indicating less financial flexibility than a year ago," the report's lead author Michelle Weaver explained.
Weaver's team estimates that through October, student loan repayments totaled $6.9 billion, with monthly payments averaging $350 a borrower. That's $350 that was likely spent or saved in the holiday seasons of 2022, 2021, etc.
Other data points to red flags on the consumer, too.
The Federal Reserve Bank of New York reported last week that credit card balances hit a fresh high of $1.08 trillion. The report showed that the rate of households becoming delinquent or entering serious delinquency (90 or more days late) on their credit cards reached the highest level in 12 years.
Why does this happen? A new monthly student loan payment could leave one unable to pay their credit card bill. If you can't pay your credit card bill, you either 1) are unlikely to use it to buy more junk for your closet, and 2) are now consumed with trying to pay the credit card bill, and are unlikely to spend freely until the balance is worked down.
A quick glance at some retail stocks underscore these trends — in the last three months, shares of Macy's (M), a discretionary retailer, have plunged 30% and Walmart (WMT), a discount retailer, has gained 2%.
So as retailer earnings commence this week, I would be on high alert for comments around student loans and how they are impacting sales and holiday planning. The Grinch lurks.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email email@example.com.