Retailers are expecting Americans to spend more money than ever this holiday season despite economic and geopolitical headwinds, the National Retail Federation (NRF) announced Thursday.
The major retail trade association projected sales to rise by 3 percent to 4 percent in November and December for a total of $957 billion to $967 billion spent during the holiday shopping rush.
Shoppers spent $930 billion during the 2022 holiday season, NRF said, which saw sales grow by around 5.4 percent from the previous year. Retailers are expecting sales to still grow, but at a slower pace than in previous years.
In the past few years, “the holiday shopping season has been filled with unmatched peculiarities for consumers and retailers alike,” Jack Kleinhenz, chief economist at the NRF, told reporters.
Pandemic-era stimulus payments swelled consumer savings and spurred record holiday spending growth, which peaked at 12.7 percent growth during the 2021 holiday season.
“The last two or three years is quite an anomaly, especially because of the shortages and the price increases because of shortages,” Kleinhenz added, noting spending growth is on track to return to what it was in the decade before the pandemic.
Inflation has also come down significantly from its 9.1 percent peak last June, but it remains above the 2 percent target of the Federal Reserve, which has hiked interest rates to 22-year highs.
The latest Michigan Consumer Sentiment Index showed consumer sentiment fell to 63.8 percent in October from 67.9 percent in September as inflation worries weighed on consumers. But retailers are still confident it won’t necessarily impact spending.
“There are consumer attitudes and then there are consumer actions, and inflation impacts their attitude,” NRF President and CEO Matthew Shay said. “But as long as the job market is as strong as it is, their actions are going to continue to power the economy.”
The U.S. unemployment rate was just 3.8 percent in September, according to the Labor Department, a month when the country added 336,000 jobs.
The Labor Department is slated to release the October jobs report Friday.
High interest rates have hiked borrowing costs, which may also impact consumer spending in the final months of the year.
Americans’ savings are dwindling and delinquency rates on credit cards, mortgages and car payments are on the rise.
Shay said he’s paying close attention to credit card balances, noting higher interest rates and borrowing costs could impact consumer spending this holiday season.
“Our sense is that the cumulative effect of all of these things is going to show some moderation in consumer behavior relative to the last several years of holiday spending. I think that’s something that was predictable, and ultimately inescapable if the economy starts to come back into better balance,” Shay said.